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Refer to Scenario 12.5. What type of discount is the supplier offering David?A: CashQUESTION: Sam Walton, founder of Walmart, was a retail genius. One thing he would do is advertise a product such as a microwave at a knock-down price. Consumers would come into the store to examine the low-priced microwave. Next to the low-cost microwaves, Walmart would position some better quality, higher-priced microwaves. The idea is that consumers will be attracted to the store due to the low-priced product but that they often upgrade and purchase a higher-priced product once they realize that it offers better quality. Such a method is completely legal as long as there are enough low-priced products available that consumers can choose from if they desire. Sam Walton used what type of pricing strategy?A: Bait PricingQUESTION: Shelly is undergoing the six-step process for establishing prices for a newly launched product. She has just finished assessing the target market's evaluationof possible prices. What is Shelly's next step?A: evaluation of competitors priceQUESTION: If a retailer purchases a can of soup for 60 cents and sells it for 99 cents, what is the markup as the percentage of cost? The percentage of selling price?A: 65%, 39.4%Explanation: To determine markup as percentage of cost, the markup (99-60) must be divided by the cost of the purchase (50). To determine markup as a percentage of selling price, the markup (99-60) must be divided by the selling price (99). The result is 65% and 39.4%. See "12-6 Selection of a Basis for Pricing" from chapter 12 for more information.QUESTION: Bert's company is about to release a new electronics product. The electronics product is estimated to have a short life cycle before it is replaced by an upgraded one. The company would like to recover the capital spent to produce the product. It therefore decides to charge the highest possible price for the product upon release. Bert's firm recognizes this might provide an advantage to competitors who may release the product at a lower price, but it believes customers will feel that the higher price signals higher quality.A: Product Quality
QUESTION: Phillip is the buyer of equipment for a large factory. Phillip wants to get the best deal possible. He does not mind paying extra, however, if it means getting equipment that will last a long time. Doug, a salesperson from an equipment firm that wants to sell to Phillip's company, has done his research. He knows that once Phillip purchases from a company, he is most likely to purchase from them in the future—especially if he views the equipment as good quality. To secure the deal Doug therefore takes 5 percent off the list price of the equipment his firm is selling to Phillip. Phillip accepts the deal. What type of discount?A: offered a trade Discount