Chap014 - CHAPTER 14 ARRIVING AT THE FINAL PRICE MULTIPLE...

CHAPTER 14
ARRIVING AT THE FINAL PRICE
MULTIPLE CHOICE QUESTIONS
14-1 CHAPTER OPENING EXAMPLE: DURACELL CONCEPTUAL
Which of the following statements about pricing policy used by Duracell Ultra with M3
Technology when it introduced the product to the market is true?
a. Duracell obviously used market penetration to gain as large a market share as possible for
its batteries.
b. Duracell used target pricing because it was in the introduction stage of its product life
cycle.
c. If the Duracell Ultra with M3 Technology is viewed as a new product category, then
Duracell used skimming pricing.
d. Duracell chose to use customary pricing for the new alkaline batteries.
e. None of the above statements about the pricing policy used by Duracell is true.
Answer: c Page: 365-366
Rationale: The introductory price for the Duracell Ultra was 25 percent higher than Duracell's
other alkaline batteries, and it was priced to create value for consumers.
14-2 CHAPTER OPENING EXAMPLE: DURACELL CONCEPTUAL
Duracell Ultra alkaline batteries with M3 technology:
a. give Duracell a competitive advantage.
b. would be in the same product life cycle stage as regular alkaline batteries.
c. would not meet the federal guidelines for identifying a new product.
d. use a price penetration strategy.
e. are a good example of a new product failure.
Answer: a Page: 365-366
Rationale: This question will require students to remember previously learned concepts. The
Duracell Ultra is more likely in an introductory stage while regular alkaline batteries are in the
mature stage of the product life cycle. The Duracell Ultra batteries would be an example of a
highly successful new product. Its price would be low relative to other alkaline batteries if it
was using penetration pricing—but it did the opposite. It is a competitive advantage because
the M3 Technology is patentable.
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14-3 THE PRICE-SETTING PROCESS CONCEPTUAL
In which step of the price setting process would a new-product manager be deciding whether
to adopt a penetration or a skimming pricing strategy for a new product she is about to
introduce to the market?
a. Make special adjustments to the list or quoted price.
b. Select an approximate price level.
c. Estimate demand and revenue.
d. Identify price constraints and objectives.
e. Set list or quoted price.
Answer: b Page: 366 Other Locations: SG
Rationale: The decision between skimming and penetration pricing is a demand-based
approach, part of step 4 in the price setting process.
14-4 SKIMMING PRICING DEFINITION
Setting the highest initial price that customers really desiring the product are willing to pay is:
a. skimming pricing.
b. penetration pricing.
c. price lining.
d. odd-even pricing.
e. prestige pricing.
Answer: a Page: 366
Rationale: Key term definition—skimming pricing
14-5 SKIMMING PRICING DEFINITION
Skimming pricing is a strategy that introduces a new or innovative product by:
a. setting the price 10 percent below its nearest competitor.