BUSML 3250 Final Exam Questions with
Correct Answers
consumerism - Answer-o The set of activities of government, business, independent
organizations, and concerned consumers that are designed to protect the rights of
consumers (AARP, PETA). Make sure ethical actions are being taken. An organized
movement of citizens and government agencies designed to improve the rights and
power of buyers in relation to sellers.
Price - Answer-Amount of money charged for a product or service, the sum of all the
values that customers give up gaining the benefits of having or using a product or
service. Only element in the marketing mix that produces a revenue.
includes determining value and differentiation
Value Based Pricing - Answer-Uses buyer's perceptions of value as the key to pricing.
Means the marketer cannot design a product and marketing program and then set the
price. Must be made before the marketing program is set. Customer values perceptions
set the ceiling. Begin by thinking about the customer.
Cost-based pricing - Answer-Involves setting prices based on the costs of producing,
distributing, and selling the product plus a fair rate of return for the company's effort and
risk. Begins by thinking about the costs.
Competition Based Pricing - Answer-Setting prices based on competitor's strategies,
costs, prices, and market offerings. Typically intended to capture market share, risky
because it allows competition to drive our pricing strategy, enter price wars.
Demand Curves - Answer-Shows the quantity of a product that customers will buy in a
market at various prices if all other factors remain the same.
Price elasticity of demand - Answer-o A measure of the sensitivity of demand to
changes in the price for the consumer.
elastic - Answer-small change in dollar equals large changes in number of units bought
inelastic - Answer-large changes in dollar equals a small change in the number of units
bought.
product prestige - Answer-have upward sloping curves due to perceived quality, status,
and exclusivity conveyed by price
increases then decreases - Answer-consumers are more sensitive to price ______ then
_______
,dynamic pricing - Answer-charging different prices based on type of customer, time of
day, day of week, season, or demand (illegal based on gender, race)
1)design a good product
2) determine product costs
3) set price based on costs
4)convince buyers of products value - Answer-steps for cost based pricing
1) assess customer needs and value perceptions
2) set target price to match customer perceived value
3) determine costs that can be incurred,
4) design product to deliver desired value at target price. (customer driven, think about
the core product) - Answer-steps for value based pricing
market skimming pricing - Answer-when a product is introduced, set a high initial price
with goals of skimming revenue layers from market
market penetration pricing - Answer-when a product is introduced, set the initial price
low with the goal of quickly building sales, market share, and profits
quickly gain market entry and market share
rapid growth in sales volume can decrease product costs
discourage competition from entering the market - Answer-benefits of market
penetration strategy
firms must have capacity to satisfy rapid increase in demand
low price may be interpreted as signal of low quality
leave money on the table - Answer-drawbacks of market penetration strategy
signal high quality market
potential to earn back R&D and investment into product
tests price sensitivity - Answer-benefits of price skimming strategy
undermined if competitors can easily access the market
product quality/image and consumer demand must support the price
high costs of producing small volumes
consumers who purchased item at higher price may be upset when price drops. -
Answer-drawbacks of price skimming strategy
product line pricing - Answer-setting the price steps between various products in a
product line based on cost differences between products, customer evaluations of
different features, and competitor's prices
having a line up of prices for each different utility from 12.99 to 25.99 to 50.99
optional product pricing - Answer-the pricing of optional or accessory products along
with a main product
, refrigerator by itself
refrigerator with ice maker
captive product pricing - Answer-- setting a price for products that must be used along
with main products, razors with a blade.
by product pricing - Answer-setting a price for by-products to help offset the costs of
disposing them and make the main product's price more competitive
selling older or leftover food for profit
product bundle prices - Answer-combining several products and offering them in a
bundle at a reduced price. Either pure components, pure bundling, or mixed bundling.
encourage sales of slow moving items, encourage stock up, encourage trial, incentive to
purchase. - Answer-benefits of bundling
reference prices - Answer-part of psychological matrix, consumers have a set price or
price range in mind (higher=overpriced, lower= inferior quality)
price image - Answer-firms, especially retailers may compete more on price image than
on price.
everyday low pricing - Answer-involves charging a constant, everyday low price with few
or no temporary discounts.
high-low pricing - Answer-involves charging higher prices on an everyday basis but
running frequent promotions to lower prices temporarily on selected items.
odd-even pricing - Answer-a psychological pricing tactic in which numeric values are
utilized to affect the customers perception of product value (odd $.19 or .$47) (even
$.20 or 2.50)
price-quality relationship - Answer-most inexperienced consumers use this as an
indicator of quality, and it becomes crucial when consumers have little knowledge about
certain brands of products.
loss leader pricing - Answer-goods or services sold below cost to encourage sales
elsewhere, purchases of other items make up loss on items sold. Typically, in super
markets or other retail outlets.
deceptive prices - Answer-reference prices that have been inflated or fictitious and
could harm consumers (at least 50% of sales must have occurred at regular price)
bait and switch - Answer-- lure customer in with low price (bait) and then pressuring
them to a higher priced option (switch) (sorry we don't have that anymore, but)
Correct Answers
consumerism - Answer-o The set of activities of government, business, independent
organizations, and concerned consumers that are designed to protect the rights of
consumers (AARP, PETA). Make sure ethical actions are being taken. An organized
movement of citizens and government agencies designed to improve the rights and
power of buyers in relation to sellers.
Price - Answer-Amount of money charged for a product or service, the sum of all the
values that customers give up gaining the benefits of having or using a product or
service. Only element in the marketing mix that produces a revenue.
includes determining value and differentiation
Value Based Pricing - Answer-Uses buyer's perceptions of value as the key to pricing.
Means the marketer cannot design a product and marketing program and then set the
price. Must be made before the marketing program is set. Customer values perceptions
set the ceiling. Begin by thinking about the customer.
Cost-based pricing - Answer-Involves setting prices based on the costs of producing,
distributing, and selling the product plus a fair rate of return for the company's effort and
risk. Begins by thinking about the costs.
Competition Based Pricing - Answer-Setting prices based on competitor's strategies,
costs, prices, and market offerings. Typically intended to capture market share, risky
because it allows competition to drive our pricing strategy, enter price wars.
Demand Curves - Answer-Shows the quantity of a product that customers will buy in a
market at various prices if all other factors remain the same.
Price elasticity of demand - Answer-o A measure of the sensitivity of demand to
changes in the price for the consumer.
elastic - Answer-small change in dollar equals large changes in number of units bought
inelastic - Answer-large changes in dollar equals a small change in the number of units
bought.
product prestige - Answer-have upward sloping curves due to perceived quality, status,
and exclusivity conveyed by price
increases then decreases - Answer-consumers are more sensitive to price ______ then
_______
,dynamic pricing - Answer-charging different prices based on type of customer, time of
day, day of week, season, or demand (illegal based on gender, race)
1)design a good product
2) determine product costs
3) set price based on costs
4)convince buyers of products value - Answer-steps for cost based pricing
1) assess customer needs and value perceptions
2) set target price to match customer perceived value
3) determine costs that can be incurred,
4) design product to deliver desired value at target price. (customer driven, think about
the core product) - Answer-steps for value based pricing
market skimming pricing - Answer-when a product is introduced, set a high initial price
with goals of skimming revenue layers from market
market penetration pricing - Answer-when a product is introduced, set the initial price
low with the goal of quickly building sales, market share, and profits
quickly gain market entry and market share
rapid growth in sales volume can decrease product costs
discourage competition from entering the market - Answer-benefits of market
penetration strategy
firms must have capacity to satisfy rapid increase in demand
low price may be interpreted as signal of low quality
leave money on the table - Answer-drawbacks of market penetration strategy
signal high quality market
potential to earn back R&D and investment into product
tests price sensitivity - Answer-benefits of price skimming strategy
undermined if competitors can easily access the market
product quality/image and consumer demand must support the price
high costs of producing small volumes
consumers who purchased item at higher price may be upset when price drops. -
Answer-drawbacks of price skimming strategy
product line pricing - Answer-setting the price steps between various products in a
product line based on cost differences between products, customer evaluations of
different features, and competitor's prices
having a line up of prices for each different utility from 12.99 to 25.99 to 50.99
optional product pricing - Answer-the pricing of optional or accessory products along
with a main product
, refrigerator by itself
refrigerator with ice maker
captive product pricing - Answer-- setting a price for products that must be used along
with main products, razors with a blade.
by product pricing - Answer-setting a price for by-products to help offset the costs of
disposing them and make the main product's price more competitive
selling older or leftover food for profit
product bundle prices - Answer-combining several products and offering them in a
bundle at a reduced price. Either pure components, pure bundling, or mixed bundling.
encourage sales of slow moving items, encourage stock up, encourage trial, incentive to
purchase. - Answer-benefits of bundling
reference prices - Answer-part of psychological matrix, consumers have a set price or
price range in mind (higher=overpriced, lower= inferior quality)
price image - Answer-firms, especially retailers may compete more on price image than
on price.
everyday low pricing - Answer-involves charging a constant, everyday low price with few
or no temporary discounts.
high-low pricing - Answer-involves charging higher prices on an everyday basis but
running frequent promotions to lower prices temporarily on selected items.
odd-even pricing - Answer-a psychological pricing tactic in which numeric values are
utilized to affect the customers perception of product value (odd $.19 or .$47) (even
$.20 or 2.50)
price-quality relationship - Answer-most inexperienced consumers use this as an
indicator of quality, and it becomes crucial when consumers have little knowledge about
certain brands of products.
loss leader pricing - Answer-goods or services sold below cost to encourage sales
elsewhere, purchases of other items make up loss on items sold. Typically, in super
markets or other retail outlets.
deceptive prices - Answer-reference prices that have been inflated or fictitious and
could harm consumers (at least 50% of sales must have occurred at regular price)
bait and switch - Answer-- lure customer in with low price (bait) and then pressuring
them to a higher priced option (switch) (sorry we don't have that anymore, but)
