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Principles of Marketing, 17e, Global Edition (Kotler/Armstrong)
Chapter 10 Pricing: Understanding and Capturing Customer Value
1) ________ refers to the amount of money charged for a product or service.
A) Value
B) Cost
C) Price
D) Wage
E) Salary
Answer: C
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Easy
2) ________ is the only element in the marketing mix that produces revenue.
A) Price
B) Product
C) Place
D) Fixed costs
E) Variable costs
Answer: A
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Easy
3) Which of the following is true with regard to price?
A) Historically, price has had the least perceptible impact on buyer choice.
B) Price is the least flexible element in the marketing mix.
C) Unlike product features and channel commitments, prices cannot be changed quickly.
D) Price is the sum of all the values that customers give up to gain the benefits of having a
product.
E) Prices only have an indirect impact on a firm's bottom line.
Answer: D
AACSB: Analytical thinking
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Moderate
4) Price is important to managers ________.
A) because prices cannot be changed quickly, so must be correctly determined
B) because a small percentage improvement in price can generate a large percentage increase in
profitability
C) but other marketing mix elements create customer value and build relationships
D) but product features can be changed more quickly
E) but has little impact on a firm's market share
Answer: B
AACSB: Analytical thinking
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Challenging
5) Prices have a direct impact on a firm's bottom line.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Easy
6) Price is the most inflexible of the marketing mix elements.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Easy
7) List some important characteristics of price.
Answer: Price is the only element in the marketing mix that produces revenue; all other
elements represent costs. Price is also one of the most flexible marketing mix elements. Unlike
product features and channel commitments, prices can be changed quickly.
AACSB: Application of knowledge; Written and oral communication
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Moderate
9) Define price. Discuss its importance.
Answer: In the narrowest sense, price is the amount of money charged for a product or a
service. More broadly, price is the sum of all the values that customers give up to gain the
benefits of having or using a product or service. Historically, price has been the major factor
affecting buyer choice. In recent decades, however, nonprice factors have gained increasing
importance. Even so, price remains one of the most important elements that determines a firm's
market share and profitability.
Price is the only element in the marketing mix that produces revenue; all other elements
represent costs. Price is also one of the most flexible marketing mix elements. Unlike product
features and channel commitments, prices can be changed quickly. At the same time, pricing is
the number one problem facing many marketing executives, and many companies do not
handle pricing well. Some managers view pricing as a big headache, preferring instead to focus
on other marketing mix elements. However, smart managers treat pricing as a key strategic tool
for creating and capturing customer value. Prices have a direct impact on a firm's bottom line.
A small percentage improvement in price can generate a large percentage increase in
profitability. More important, as part of a company's overall value proposition, price plays a
key role in creating customer value and building customer relationships.
AACSB: Analytical thinking; Written and oral communications
Skill: Concept
Objective: LO 10.1: Answer the question "What is a price?" and discuss the importance of
pricing in today's fast-changing environment.
Difficulty: Moderate
10) What sets the ceiling for product prices?
A) product manufacturing costs
B) sellers' perceptions of the product's value
C) customer perceptions of the product's value
D) variable costs
E) break-even volume
Answer: C
AACSB: Analytical thinking
Skill: Concept
Objective: LO 10.2: Identify the three major pricing strategies and discuss the importance of
understanding customer-value perceptions, company costs, and competitor strategies when
setting prices.
Difficulty: Easy
11) What sets the floor for product prices?
A) consumer perceptions of the product's value
B) product costs
C) competitors' strategies
D) advertising budgets
E) market competition
Answer: B
AACSB: Analytical thinking
Skill: Concept
Objective: LO 10.2: Identify the three major pricing strategies and discuss the importance of
understanding customer-value perceptions, company costs, and competitor strategies when
setting prices.
Difficulty: Easy
12) Effective ________ pricing involves understanding how much value consumers place on
the benefits they receive from the product and setting a price that captures that value.
A) competition-oriented
B) cost-based
C) time-based
D) customer-oriented
E) marketer-oriented
Answer: D
AACSB: Analytical thinking
Skill: Concept
Objective: LO 10.2: Identify the three major pricing strategies and discuss the importance of
understanding customer-value perceptions, company costs, and competitor strategies when
setting prices.
Difficulty: Easy
13) ________ pricing uses buyers' perceptions of value as the key to pricing.
A) Customer value-based
B) Cost-based
C) Time-based
D) Markup
E) Target return
Answer: A
Skill: Concept
Objective: LO 10.2: Identify the three major pricing strategies and discuss the importance of
understanding customer-value perceptions, company costs, and competitor strategies when
setting prices.
Difficulty: Easy
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