Marketing Final Exam

Goods and explain how marketers can take advantage of

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Unformatted text preview: se the price–quality relationship to evaluate goods and explain how marketers can take advantage of this consumer response. ANS: Consumers tend to rely on price as an indicator of product quality; that is, a higher price indicates higher quality in the form of better materials, more careful workmanship, or higher service levels. Conversely, lower price indicates lower quality, as illustrated by the adage, “you get what you pay for.” Marketers can take advantage of the price–quality phenomenon by increasing the price of the product to enhance the image of their product. This is known as a prestige pricing strategy. PTS: 1 REF: 316 Communication KEY: CB&E Model Pricing OBJ: 19-6 TOP: AACSB MSC: BLOOMS Synthesis Chapter 20—Setting the Right Price TRUE/FALSE 1. The first step in setting the right price for a new product is to estimate demand, costs, and profits. ANS: F The first step in setting the right price is to establish pricing goals. PTS: 1 REF: 319 Thinking KEY: CB&E Model Pricing OBJ: 20-1 TOP: AACSB Reflective MSC: BLOOMS Knowledge 2. All pricing objectives have trade-offs that managers must weigh. ANS: T PTS: 1 TOP: AACSB Reflective Thinking MSC: BLOOMS Comprehension REF: 319 OBJ: 20-1 KEY: CB&E Model Pricing 3. Once he compiles information on pricing objectives, market demand, quantity supplied, and the price elasticity of demand, the owner/operator of a home cleaning service will be ready to determine the optimal price for a new service offering. ANS: F He must also collect information or estimates about costs and total revenue at a variety of prices. Only then can he make reasonable estimates about profits and market share. PTS: 1 REF: 320 Thinking KEY: CB&E Model Pricing OBJ: 20-1 TOP: AACSB Reflective MSC: BLOOMS Application 4. The manufacturer of Trek Natural sports drink would like to introduce a Trek Natural brand energy drink in the already crowded energy drink category. This company would have a great amount of freedom in choosing a price for its new energy drink. ANS: F If a firm brings out a new item similar to a number of others already on the market, its pricing freedom will be restricted. PTS: 1 REF: 320 Thinking KEY: CB&E Model Pricing OBJ: 20-1 TOP: AACSB Reflective MSC: BLOOMS Application 5. Penetration pricing is sometimes referred to as a “market-plus” approach to pricing. ANS: F Price skimming is sometimes referred to as a “market-plus” approach to pricing. PTS: 1 REF: 320 Thinking KEY: CB&E Model Pricing OBJ: 20-1 TOP: AACSB Reflective MSC: BLOOMS Comprehension 6. It makes the most sense to use price skimming as a pricing policy when supply is greater than demand. ANS: F It makes the most sense to use price skimming as a pricing policy when demand is greater than supply. PTS: 1 REF: 321 Thinking KEY: CB&E Model Pricing OBJ: 20-1 TOP: AACSB Reflective MSC: BLOOMS Comprehension 7. Procter & Gamble entered the electric toothbrush market with the Crest Spinbrush at a price...
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