mkg300 exam 6

Which of the following best defines the goal of a sales-oriented pricing objective?
seeks some level of unit sales, dollar sales, or share of market—without referring to profit.
Which of the following is LEAST LIKELY to be in the “Something of Value” part of the “price equation” for CHANNEL MEMBERS?
rebates.
A pricing objective that seeks a specific level of profit is a:
A target return objective
Fidelity Corp. earned a 6 percent return on investment last year and wants to increase it to 10 percent this year. Which of the following pricing objectives is Fidelity seeking?
target return objective
Target return pricing objectives:
has administrative advantages. Performance can be compared against the target. Some companies eliminate divisions, or drop products, that aren’t yielding the target rate of return.
Profit maximization pricing objectives:
seeks to get as much profit as possible.
Sales-oriented pricing objectives:
seeks some level of unit sales, dollar sales, or share of market without referring to profit.
Some nonprofit organizations set prices to increase market share because
they are not trying to earn a profit.
The problem with sales-oriented pricing objectives is that:
sales growth doesn’t necessarily mean big profits.
Which of the following is a status quo oriented pricing objective?
aggressive overall marketing strategy
Which of the following statements would be most likely to be made by a manager with a status quo pricing objective?
stabilize prices
meet competition
avoid competition.
“Don’t-rock-the-boat” thinking is most common when
total market is not growing.
Faced with many “me-too” competitors, Sonic Burgers, Inc. has set its price level to “meet competition”—while emphasizing nonprice competition. Sonic Burgers’ pricing objective seems to be a ______________ objective.
status quo
A one-price policy means:
offering the same price to all customers who purchase products under essentially the same conditions and in the same quantities.
The majority of U.S. firms use a one-price policy
for administrative convenience and to maintain goodwill among customers.
White Sands Heavy Equipment Co. produces industrial equipment that it sells through its national sales force. Its sales reps often must negotiate with customers to match the low prices of foreign competitors. Apparently, the firm has
flexible pricing policy
Which pricing policy would probably be best for a profit-oriented producer introducing a really new product with a very inelastic demand curve?
Skimming
When Apple first introduced its iPhone in the U.S. market, it priced it at $600. Several months later, Apple reduced the price to $400. And several months after that, it reduced the price again to $200. What pricing policy was Apple using in its initial price strategy?
Skimming
A “penetration pricing policy”:
tries to sell the whole market at one low price. It may be wise if the firm expects strong competition very soon after introduction.
Which pricing policy is probably “best” for a profit-oriented, low-cost producer who is introducing a new product into a market with elastic demand and is expecting strong competition very soon after product introduction?
penetration pricing policy
Some developers of apps for the Apple iPhone price their apps low at launch to encourage sales and get attention so they can move into the prestigious “Top 25” list. Then, they frequently raise prices to get a higher profit margin on later sales. The initial low price is a(n):
Introductory price dealings.
Which of the following observations concerning introductory price dealing is true?
Introductory price dealings
When setting a price level policy, a good marketing manager knows that:
Introductory price dealing usually increases sales
penetration price makes the most sense when there is a small elite market
skimming price may lead to high profits if demand is very elastic and it’s easier to lower prices if the initial price is too high.
It is not uncommon for sales personnel at The Electronics Showroom to use aggressive sales tactics to encourage customers to buy Giant-Size brand televisions. Giant-Size has encouraged this behavior by using:
Push money (or prize money) allowances—sometimes called PMs or spiffs
Offering a NONCUMULATIVE quantity discount seeks to:
-encourage larger orders but do not tie a buyer to the seller after that one purchase.
-shift some of the storing function to the buyer, and they reduce shipping and selling costs for the seller.
Noncumulative quantity discounts
-apply only to individual orders.
-encourage larger orders but do not tie a buyer to the seller after that one purchase.
A marketing manager might offer a cash discount to channel members to:
encourage buyers to pay their bills quickly.
A firm has just received an invoice for $1,000 with the following terms: 3/10, net 30. In this case, the firm:
A discount of 3/10, net 30 means that the buyer earns a 3 percent discount for paying the invoice just 20 days sooner than it should be paid. By not taking the discount, the company in effect is borrowing at an annual rate of 54 percent. (360 days/20 days) = 18 periods; (18 periods*3 percent) = 54 percent a year.
To get the sale price, customers
give up the convenience of buying when they want to buy and instead buy when the seller wants to sell.
A seller’s invoice reads: “Seller pays the cost of loading said merchandise onto a common carrier. At the point of loading, title to such products passes to the buyer, who assumes responsibility for damage in transit, except as covered by the transportation agency.” This shipment has been shipped:
F.O.B. means free on board some vehicle at some place. F.O.B. shipping point means the seller pays the cost of loading.
A producer in Philadelphia uses ______ It’s selling widgets for $150/ton in the Eastern Zone—which includes Richmond and Baltimore. The actual freight cost from its plant to Baltimore is $70/ton and from its plant to Richmond is $80/ton. In this situation:
Zone pricing
Freight absorption pricing
firm’s delivered price meets that of the nearest competitor.
Which of the following statements concerning “value pricing” is FALSE?
-doesn’t necessarily mean cheap if cheap means bare-bones or low grade.
-It doesn’t mean high prestige either if the prestige is not accompanied by the right quality goods and services.
-focus is on the customer’s requirements and how the whole marketing mix meets those needs.
Honda Motor Co. prices its whole line (from the $15,000 Honda Fit economy sedan to the
$40,000 Pilot SUV) so that it offers high quality at reasonable prices. What pricing policy is Honda using?
Value pricing
In an oligopoly situation, a wise marketing manager will probably set the firm’s price level:
meeting competition
Which of the following may be the only sensible pricing policy in oligopoly situations?
oligopoly situations
Antidumping laws:
The United States and most other countries control the minimum price of imported products
Recently, some executives for highway construction companies agreed to stop competing with each other on price and to meet every three months to decide their price for the next quarter. In this situation:
-Price fixing
-It is considered “conspiracy” under the Sherman Act and the Federal Trade Commission Act.
Which of the following laws specifically makes illegal any price discrimination which injures competition?
The Robinson-Patman Act (of 1936)
Which of the following laws focuses specifically on price discrimination?
The Robinson-Patman Act (of 1936)
The Robinson-Patman Act does permit some price differences—but they must be based on
(1) cost differences
(2) the need to meet competition
A large producer who offers no discounts and the same prices to all customers in the U.S.:
The Robinson-Patman Act (of 1936)
Price discrimination:
The law does permit some price differences—based on (1) cost differences or (2) the need to meet competition.
Advertising allowances offered by producers can be ILLEGAL unless they are made available:
-push money
-advertising allowances
-other promotion aids to some customers and not others unless they are made available to all
The stockturn rate is
the number of times the average inventory is sold in a year.
Stockturn rate means:
is the number of times the average inventory is sold in a year.
Best Buy sets its prices below other electronics stores in its service area and generally attracts more customers than the others. Best Buy apparently hopes to earn a profit by
A low stockturn rate
Regarding markups and turnover:
A low stockturn increases inventory carrying cost and ties up working capital.
A disadvantage of average-cost pricing is that it
does not make allowances for cost variations as output changes.
The basic problem with the average-cost approach is that it
doesn’t consider cost variations at different levels of output.
Total fixed cost:
is the sum of those costs that are fixed in total, no matter how much is produced.
Which of the following would NOT be included in a producer’s total fixed cost?
-rent
-depreciation
-managers’ salaries
-property taxes
-insurance.
The big problem with average-cost pricing is that:
there is no way to include a desired profit per unit
The major weakness of “average-cost pricing” is that:
Ignoring demand
Identify a weakness of the average-cost approach.
ignores competitors’ costs and prices.
At break-even point (BEP),
total cost is equal to total revenue
The BEP, in units, can be found by dividing
total fixed costs by the fixed-cost contribution per unit.
In a typical break-even analysis, a firm’s fixed-cost contribution per unit:
assumed selling price per unit minus the variable cost per unit.
Break-even charts usually assume that:
-total cost and total revenue curves are straight lines
-profits grow continually beyond the break-even point
-the break-even point is reached when total cost just equals total revenue
-that any quantity can be sold at the assumed price.
A typical break-even analysis assumes that:
assume the total revenue curve is a straight line; the demand curve is horizontal; average variable cost is the same at different levels of output; and profits will grow continually beyond break-even point.
Which of the following pricing approaches specifically considers the concept of elasticity of demand?
None of the above pricing approaches consider the concept of elasticity of demand.
If a profit-oriented marketing manager doesn’t know the exact shape of the firm’s demand curve, marginal analysis:
focuses on the price that earns the highest profit.
A marketing manager has just estimated that her firm’s marginal revenue will become negative if a proposed price cut is made. This means that:
may increase units sold, but may result in lower revenue
The change in a company’s total cost from producing one more unit is called:
Marginal cost
According to the rule for maximizing profit, the highest profit is earned at the price where
marginal cost is just less than or equal to marginal revenue.
To maximize its profit, a producer should set a price (and produce that related output) where:
where marginal cost is just less than or equal to marginal revenue.
Customers are likely to be less price sensitive when:
someone else pays the bill or shares the cost.
Consumers are more likely to be price sensitive when _____.
-have substitute ways of meeting a need
-they are likely to be more price sensitive.
Customers are likely to be less price sensitive
greater the significance of the end benefit of the purchase.
Customers are likely to be more price sensitive when:
1) the total expenditure is great
2) they have to pay the bill themselves
3) the end benefit isn’t very significant
4) they haven’t yet spent any money related to the purchase.
Which of the following applies to “value in use pricing?”
means setting prices that will capture some of what customers will save by substituting the firm’s product for the one currently being used.
A retail store advertises an SLR digital camera for $350. Once bargain hunters come to the store, salespeople point out the disadvantages of the low-priced camera and try to convince them to trade up to a better, and more expensive, unit. This is an example of
Bait pricing
Gabriella Sax believes that customers in her dress shop find certain prices very appealing. Between these price levels, all prices are seen as roughly the same—and price cuts in these ranges generally do not increase the quantity sold (i.e., the demand curve tends to drop vertically within these price ranges). Therefore, Sax prices her items as close as possible to the top of each such price range. This is:
Psychological pricing
Some retailers commonly use prices that end in certain numbers. They seem to assume that their customers see prices with these numbers as substantially lower. This is:
Odd-even pricing
Alex’s Knot Shop prices its ties at $5 intervals from $10 to $25 because most customers find these prices appealing and easier to compare. This is:
Price lining
The idea that people will pay extra for “quality” and status is the idea behind
Prestige pricing
When Nintendo sets a relatively low price on its game units to stimulate more demand for its game cartridges, it is using
Complementary product pricing
A firm is looking to construct a new office. It puts out a request for proposals from contractors inviting their price quotations given certain defined specifications. This is an example of:
Bid pricing
With regard to bid pricing, a marketing manager should be aware that:
estimating all the costs that will apply.
To improve the effectiveness of the marketing control process, the marketing manager should:
Fast feedback is not possible unless data are in a form that can be quickly sorted and analyzed by computer
Which of the following statements about customer complaints is FALSE?
handled well by the company usually help it win new customers.
Studies have shown that customers who weren’t satisfied with response to their complaints
told twice as many people.
Whistler’s Camping Supplies wants to identify its most frequent customers and offer them quantity discounts to increase their purchases and loyalty. Which of the following implementation approaches might address that problem?
-“favored customer club”
-customer complaints
Sam Reuter, marketing manager for Herbal Shampoo Company, has to choose one of three different proposed labels for a new herbal shampoo. How might Sam pretest consumer response to the labels?
Marketing managers can use faster feedback to develop a competitive advantage.
Which of the following statements is NOT TRUE?
Marketing implementation usually involves decisions and activities related to both internal and external matters.
Regarding controlling marketing programs:
-control process helps marketing managers learn how ongoing plans are working.
-Good control helps the marketing manager locate and correct weak spots and at the same time find strengths that may be applied throughout the marketing program.
Sales analysis is a:
detailed breakdown of a company’s sales records.
Marketing sales analysis:
requires a detailed breakdown of a company’s sales records.
Detailed sales analysis is:
-information that is too detailed or complex can drown a manager.
-Information systems can spew out more data than a manager can absorb.
Sales analysis:
-involves reorganizing existing information rather than gathering new information.
-involve analyzing many different breakdowns of overall sales
-good first step when setting up a control system.
Compared with sales analysis, PERFORMANCE ANALYSIS:
looks for exceptions or variations from planned performance.
Which of the following observations concerning performance analysis is true?
-doesn’t have to be limited to sales.
-Other data can be analyzed too.
-These data may include the frequency of stock-outs, the number of sales calls made, the number of orders, customer satisfaction ratings, or the cost of various tasks.
Doug Selkirk is a sales manager for IBM. He has asked his assistant to prepare an analysis that shows what percent over or under quota each sales rep was during the last year. This is an example of
purpose of performance analysis
Performance analysis:
compares what did happen with what ought to have happened.
Avon, Inc., has analyzed the market potential in its territories and set sales quotas for its salespeople. It is now in a good position to develop ______________ indexes at the end of the year.
performance
If Salesperson A has a performance index of 80 and Salesperson B has a performance index of 120:
If a sales rep is batting 82 percent, the index is 82.
According to the _____, much good information is hidden in summary data.
iceberg principle
The iceberg principle suggests that
much good information is hidden in summary data.
Which of the following statements best explains the “iceberg principle”?
Averaging and summarizing data are helpful, but be sure summaries don’t hide more than they reveal.
A sales manager is trying to determine why the company’s sales are down compared to a year ago. He starts with sales data summaries but quickly decides to break down sales further by territory, then salesperson, then store, and finally product. His actions suggest the:
iceberg principle
General summaries of overall marketing cost data
-Averaging and summarizing data are helpful, but be sure summaries don’t hide more than they reveal.
-Marketing managers need facts to avoid rash judgments based on incomplete information.
Marketing cost analysis shows that one of Buildco, Inc.’s customers is unprofitable, so Buildco should
-specific market segments
-customers
-specific products
-geographical market segments
-determine why customer is unprofitable.
Using cost analysis to analyze the money being spent by a firm is analogous to using ____________ to analyze the money coming into the firm.
sales
_________ are the two basic approaches to handling marketing cost allocation problems.
-full-cost approach
-contribution-margin approach.
A contribution-margin income statement shows:
its contribution to both fixed costs and profit.
The “contribution-margin approach” to marketing cost analysis:
-variable costs
-costs directly related to particular alternatives
With the “contribution-margin approach” to marketing cost analysis,
-focuses attention on variable costs rather than on total costs.
-Total costs may include some fixed costs that do not change in the short run and can safely be ignored or some common costs that are more difficult to allocate.
The contribution-margin approach focuses attention on _____ rather than on ______.
variable costs rather than on total costs
marketing auditor for a firm will most likely:
-is a systematic, critical, and unbiased review and appraisal of the basic objectives and policies of the marketing function.
-It does not develop the plan or policies for a firm.
A ________ requires a detailed look at the company’s current marketing plans to see if they are still the best plans the firm can offer.
marketing audit
A marketing audit:
requires a detailed look at the company’s current marketing plans to see if they are still the best plans the firm can offer. A marketing audit helps ensure that the company’s strategies are on the right track and being implemented properly. A marketing audit takes a big view of the business—and it evaluates the whole marketing program.
A marketing audit is necessary because:
An outside view can give needed perspective
A good reason for using performance indexes is to:
make easier to compare situations
Which of the following observations concerning the full-cost approach is NOT TRUE?
All costs are not allocated in all solutions
Which of the following observations is true?
The CM approach ignores some costs to get results
Lori Winters, a regional sales manager, is interested in the profitability of the different sales reps in her region. She has used a variety of different approaches for allocating fixed sales expenses to the different sales reps, but she reaches very different conclusions depending on which allocation approach is used. In this case, it would be wise for Ms. Winters to supplement her other analyses with an analysis based on
contribution margin approach
Regarding the “contribution-margin approach” to marketing cost analysis, which of the following statements is TRUE?
this approach may suggest a different action than the full cost approach
When deciding how to evaluate costs, a marketing manager should realize that
the best method for dealing with fixed costs depends on the objective of the analysis
When the “full-cost approach” to marketing cost analysis is used, allocating fixed costs on the basis of sales:
may take low volume costumers appear more profitable than they are
Which of the following would be the BEST reason to use the “full-cost approach”
-when comparing the performance of several product managers
-It makes each manager bare a share of the OH expenses which were made for everyones benefit.
The ____ approach shows operating managers and salespeople what they’ve actually contributed to covering general overhead and profit
contribution margin