Exam 12: Pricing for Value

Target profit pricing is best described as a cost- oriented approach to pricing.

Under freight absorption pricing, the buyer is required to absorb all of the freight costs.

Firms which utilise market penetration pricing are seeking market share based on pricing rather than margin.

Buyers who receive a discount for purchasing in large volumes are receiving:

If all sellers in an industry selected the same location as a basing point, no seller would enjoy a locational advantage with regard to freight charges.

When AST computers offers a computer, software, printer, and service contract at a price below the individual elements' normal selling prices, this is an example of product- bundle pricing.

Before initiating a price cut, the firm considering such a move should assess the likelihood and consequences of a price war.

There are many common mistakes in pricing. Which of the following is NOT one of the common mistakes?

Budget- priced airlines have unbundled the airline service offering, stripping it right back to a basic seat with only a minimal baggage allowance. This product strategy has allowed budget airlines to charge consumers for "extras" such as refreshments, additional leg- room, check- baggage allowances, headsets, boarding passes, guaranteed window seats and in some cases reservations for seats next to each other in the case of families or couples travelling together. This pricing strategy is BEST described as:

Since pricing is of primary importance to the firm, it should be considered in isolation from the other elements of the marketing mix.

Frogmore Gardens in central Victoria specialises in mail- order supplies of bare- rooted perennial plants, herbs and cottage garden favourites to retail and wholesale customers around Australia. Frogmore Gardens sends one of the most extensive catalogues of plants to customers in late Spring each year. When customers place their orders, they must also pay a delivery fee. The schedule of delivery fees is included in the catalogue and shows that rates are based on the state where customers live and are as follows: Vic= $11.50; NSW and SA = $12.50; Queensland = $14.50; Tasmania = $17.50. Frogmore Gardens is using:

The Alpha Corporation typically seeks to have its products displayed beside more expensive brands. The firm is hoping to influence the reference price of its products.

Quantity discounts may be an effective means of encouraging customers to concentrate their purchases with a particular seller.

A carpet steam cleaning company is offering a fantastic price deal. The offer includes the cleaning of three rooms plus a sofa and two cushions for $80. This is an example of product- bundle pricing.

When demand falls by following a rise in the price of a product or service, the demand curve is said to exhibit a(n) __________ relationship.

Fred has visited several Toyota dealers looking for the best terms on a new car. He wants a great trade- in for his old car plus he is trying to negotiate a number of free accessories such as alloy wheels, air conditioning and GPS. Fred knows that he can drive a hard bargain with the Toyota dealers and that regardless of which dealer he selects, he will still qualify for the manufacturer's advertised "cash back" offer of $1,000 on every new car purchased before 30 July. Toyota's cash back offer is BEST described as a(n):

In producing its primary product, the Meatpack Corporation also generates several by- products of little or no value. The firm should consider selling these by- products at any price above the cost of storing or delivering them.

The service sector's equivalent to captive product pricing is known as:

Under which of the following market conditions are sellers MORE likely to develop differentiated offers for different customer segments and, in addition to price, freely use branding, advertising and personal selling to set their offers apart?

Your text details four basic approaches or methods used by organisations to pricing of products in the market. These are cost- based, competition- based, value- based and relationship- based pricing. Describe each of these approaches and outline the strengths and weaknesses of each with examples to demonstrate your understanding.