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Marketing Final Exam

Profits target return on investment sales oriented

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Unformatted text preview: OFIT-ORIENTED PRICING OBJECTIVES include: profit maximization • satisfactory profits • target return on investment • SALES-ORIENTED PRICING OBJECTIVES include: market share • sales maximization (dollar or unit sales) • STATUS QUO PRICING OBJECTIVES include: maintaining the existing price • meeting the competition • PTS: 1 REF: 302-305 Communication KEY: CB&E Model Pricing OBJ: 19-2 TOP: AACSB MSC: BLOOMS Synthesis 4. Last quarter, Abingdon Company sold 1,000 decorative decals for $1 each; Cedar Decaliania sold 200 decorative decals at $4 each; Creative Decals sold 500 decals at $2 each; and Donnelly, Inc. sold 300 decals for $4 each. Assuming that the four companies are the only firms competing in the decorative decal market, calculate unit and dollar market share for each company for last quarter. For each company, which market share figure might be used in an advertisement for that company? ANS: The following calculation table shows the resultant unit and dollar shares. Market share should be expressed in percentage points. Firms often state market share in terms that are most flattering to the company. Abingdon would express unit shares in an advertisement, while Cedar Decaliania and Donnelly would use dollar shares. Creative Decals’ market share is 25 percent for either calculation. Company UnitsSold UnitPrice TotalRevenu UnitMarket Revenue e Share Market Share Abingdon $1,000 ÷ 1,000 ÷ 2,000 1,000 $1.00 $1,000 $4,000 = = 50% 25% Cedar $ 800 ÷ 200 ÷ 2,000 Decaliania 200 4.00 800 $4,000 = = 10% 20% Creative $1,000 ÷ 500 ÷ 2,000 Decals 500 2.00 1,000 $4,000 = = 25% 25% Donnelly, Inc. $1,200 ÷ 300 ÷ 2,000 300 4.00 1,200 $4,000 = = 15% 30% 2,000 $4,000 100% 100% See Exhibit 19.1. PTS: 1 REF: 304 OBJ: 19-2 TOP: AACSB Analytic | AACSB Communication MSC: BLOOMS Synthesis KEY: CB&E Model Pricing 5. List the two primary determinants of price. What other factors can affect price setting? ANS: The price established depends primarily on (1) DEMAND for the good or service and (2) the COST to the seller for that good or service. Other factors that would influence price include distribution strategies, promotion strategies, perceived quality, needs of large customers, the Internet, and the stage of the product life cycle. PTS: 1 REF: 305 Communication KEY: CB&E Model Pricing OBJ: 19-3 TOP: AACSB MSC: BLOOMS Synthesis 6. The daily demand for bottled water is 35 bottles when the price is set at $1. However, if the price is raised to $5, the demand is only 5 bottles. The bottled water producer is willing to supply 40 bottles if the price is set at $5 per bottle but will only supply 10 bottles if the price is set at $2. Draw the supply and demand curves for the water bottles on the graph below. Label each curve and each axis. At what level does equilibrium occur? What are the areas of surplus and shortage? ANS: The vertical axis should be labeled as price, and the horizontal axis should be labeled as quantity. The demand curve sh...
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