Session:12 Pricing Products and Services

Answer Key

Principles of Marketing | Leadership Development – Micro-Learning Session

Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-marketing

12.1 Knowledge Check

1. a. Artificial time constraints tell the consumer they will miss out if they don’t purchase right now.
2. c. To determine profit, total costs (fixed and variable) are subtracted from total revenue.
3. a. Perceived value is perceived benefits less perceived costs.
4. d. Price anchoring is a strategy that utilizes a psychological theory that buyers frame their price reference
around the first piece of information they see.
5. b. The value that a buyer receives from an exchange takes into account the perceived benefits and costs of
making the purchase.

12.2 Knowledge Check

1. c. Channels of distribution include the importance of understanding the value of a product through the
lens of suppliers and retailers.
2. d. Compatibility refers to the consistency of pricing decisions with the other marketing mix elements.
3. a. Analyzing the critical Cs of pricing will help ensure the pricing strategies are set appropriately.
4. b. Cost does not only include the materials needed to produce a produce, but all other costs associated
with doing business.
5. d. The five critical Cs of pricing include cost, customers, channels of distribution, competition, and
compatibility.
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12.3 Knowledge Check

1. c. The demand curve describes the relationship of demand and price for most goods and services.
2. b. Fixed costs do not change based on the number of units produced.
3. d. As demand declines for a product, it is generally expected that prices will also decrease.
4. a. Total costs are equal to fixed costs + variable costs.
5. d. Cross-elasticity of demand refers to the increase in demand for a substitute product when the price of a
product increases.

12.4 Knowledge Check

1. c. Penetration pricing is setting an initially low price to capture as much market share as possible.
2. d. The break-even unit formula is Fixed Costs / (Unit Price + Variable Unit Cost)
3. a.
4. b. Price skimming sets an initially high price to capture the portion of the market willing to pay the price.
5. d. Penetration pricing attempts to capture the greatest market share possible when introducing a new
product.

12.5 Knowledge Check

1. c. Bundle pricing is a tactic that has a lower price for a bundle of items than when those items are
purchased separately.
2. a. Captive pricing is a tactic used when there is both a core and a captive product.
3. a. Odd-even pricing is a tactic used to illustrate value or quality to a customer through pricing.
4. b. Price skimming sets an initially high price for new products to capture the portion of the market willing
to pay the price.
5. d. Economy pricing is a tactic in which products are priced much lower than their name-brand
competitors.