Exam 14: Pricing Strategies

Devon is a wholesaler for water purification systems. Valerie was one of his first customers, and she's continued to purchase a fair number of systems from him over the years. Recently, Valerie asked Devon if he could cut her a break on her next order, especially since she's been such a steady, loyal customer for so long. How should Devon respond?

Which of the following statements is true about the forecasting technique known as the "survey of buyer intentions"?

Lysol sanitizing wipes entered the market at a low sales price and was supported by heavy couponing. As the initial trial period passed, the pricing slowly rose and the couponing became more infrequent. This activity is an example of penetration pricing.

High-demand sporting or concert events have encountered an expensive, often illegal, form of pricing where tickets are resold at a much higher price than what it was originally bought for. This practice is called ticket scalping.

You're the marketing director for a software development start-up. Your company is only a week away from launching the most forward-thinking new software it has ever developed, and everyone is excited about the product's sales potential. Suddenly, the CEO says you've got to use the Delphi technique to make one more sales forecast before the launch. What do you say to change her mind?

Bath & Body Works brand shower gels retail for about $12.50 a bottle, while Suave Naturals shower gels retail for about $3.00 a bottle. A recent survey conducted by Suave revealed that many people enjoy the Suave gel fragrances just as much as the Bath & Body Works fragrances. Why might some people still be willing to pay a higher price for the Bath & Body Works products?

A 5 percent increase in the price of corn flour that results in a 15 percent increase in the quantity supplied yields a price elasticity of supply for corn flour of:

As the chief marketing officer for one of the most successful candy manufacturers in the country, you know how important Valentine's Day sales are to your organization. You are somewhat concerned about next year's sales, however, because one of your major competitors launched a new candy last year that's been tremendously popular, and you suspect they're going to roll out a bite-size version just in time for this candy lover's holiday. Is trend analysis still a good technique for you to use in forecasting sales for next year?

In the grocery business, you're pretty much stuck in a competitive pricing environment. You can't afford to attract more customers by lowering all of your prices, but what could you do differently with your product and pricing tactics to entice people through your stores' doors?

You begin every work day by stopping by the local premium coffee shop for a latte. They recognize you when you come in and just hand you your regular order. Recently, a number of events happened at the same time: you got a promotion with a higher salary; your regular coffee shop increased its prices; and a competitor moved into the same shopping center, offering lower prices. ​ Required: During your vacation, you have the luxury of time to reflect on your workday pattern of coffee consumption. Looked at from a marketing perspective, which action could you choose to show that your demand is more elastic?

A 5 percent increase in the price of milk that results in a 2 percent decrease in the quantity of milk demanded yields a price elasticity of demand for milk of:

You're a senior product manager for an educational product publisher, and your team has come up with an intriguing new twist on a digital economics textbook. To get a better sense of how well this product might sell, you've invited several other senior product managers from other fields, such as business, statistics, and marketing, to provide feedback on your idea. Jonah thinks it's an amazing idea he should copy. Yvonne is sure it will be far too expensive. Marianna says it wouldn't appeal to her customers. What have you learned from this experience?

A price of $ 9.97 is less likely to appeal to customers than $ 9.95 or $ 9.99.

Your invention is a hit! Your investment in TV informercials has really paid off, and you've already ordered another 10,000 units to be manufactured. What do you anticipate will happen next?

If consumers can easily find close substitutes for a good or service, the product's demand tends to be inelastic.

Your co-worker, the operations manager of Blue Ocean Seafood Restaurants, has pointed out a slight decline in diners ordering and eating the chain's famous cheesy butter biscuits. The head of product development has a theory that people want lighter options today, and she has recommended test marketing a lower-fat version of the biscuits at select locations in eight major cities across the United States. As the marketing director, how do you respond?

Many food producers and restaurants believe that the best way to predict sales of a new product is to make it available to a subset of the people who are most likely to buy it. That's why General Mills would most likely use ___ to forecast sales of a new whole grain cereal.

A couple of years ago, Google - the information services giant - made one of its first forays into manufacturing and selling a physical product: the Google Pixel smartphone. It is highly unlikely that Google used ___ to forecast sales of this new product.

Thanks to a couple of high-profile celebrities wearing your company's products at highly publicized events, your exclusive, high-end, faux-fur coats are taking off! Fashion-forward consumers want your coats, and they're willing to pay top dollar for them. Now Nordstrom, the higher-end department store chain, wants to distribute your faux-fur coats. How do you respond to Nordstrom in a way that protects your brand's prestige?

Identify and briefly describe two legal constraints placed on pricing.