Marketing Objective 4.01 Review

Charise is considering how much to charge for her small business’s products. Charise is involved in

• pricing.

• promotion.

• a place decision.

• a product decision.

Answer explanation

Pricing is the determination of an exchange price at which the buyer and seller perceive optimum value for a good or service. Promotion stimulates demand for products by informing customers of the products’ availability. Place decision is the marketing element focusing on considerations in getting a selected product in the right place at the
right time. Product decision refers to what goods, services, or ideas a business will offer
its customers.

A buyer is willing to pay $9.99 for a product. If the seller is willing to accept that amount, then $9.99 is the

• demand.

• value.

• markdown.

• exchange price.

Answer explanation

The exchange price is the amount that both customers and sellers are willing to accept. Value is the amount of satisfaction a product will provide the customer. Markdowns are reductions in prices used to sell slow-moving or clearance items. Demand is the quantity of a good or service that buyers are ready and willing to buy at a given price at a particular time.

Sellers must carefully set prices so that buyers feel they are receiving _________ value for their money.

• no

• minimum

• little

• optimum

Answer explanation

Buyers need to feel that they are getting the most for the money they spend. If they felt that they were receiving minimum, little, or no value for the money spent for products, they would probably spend their money elsewhere in the future.

What might happen if a business’s customers feel that they are not getting the most value for their money?

• Sales increase.

• Customers spend money elsewhere.

• Customers purchase more.

• Sales remain the same.

Answer explanation

If customers feel that a business’s goods are overpriced, they will find somewhere else to buy. Sales will not increase, customers will not purchase more, and sales will not remain the same if customers feel that they are not
getting the most for their money from a company.

Can prices be set too low?

• Yes, customers may feel quality is too low.

• Yes, customers may feel quality is too high.

• No, the lower the price, the greater the product’s appeal.

• No, the lower the price, the more willing the customer is to buy.

Answer explanation

Quality and price are often considered the same by customers. Higher priced items are usually perceived as high-quality products. Customers who feel lower prices reflect low quality will not buy more of that product.

With what do many customers associate price?

• Quality

• Discounts

• Comfort

• Location

Answer explanation

. Quality and price are often considered the same by many customers. Comfort is more often associated with the brand name or quality of the product. Discounts are often offered on slow-moving products, and location affects the number of sales.

A downturn in the economy has forced a home builder to lower its prices. This company has _________ prices.

• realistic

• flexible

• competitive

• inflexible

Answer explanation

Economic hardships often force companies to lower prices to sell their products. Realistic prices are often associated with the quality of the product. Competitive pricing occurs when you try to meet or beat your nearest competitor’s prices. Inflexible pricing occurs when a company refuses to change its prices to meet customer demand.

A station across the street is offering gasoline for five cents cheaper per gallon. The other stations in the area decide to lower their prices as well. This is an example of (a)   pricing.

• inflexible

• unrealistic

• competitive
• realistic

Answer explanation

Adjusting prices to meet or beat the competition is competitive pricing. Competitive pricing often means being flexible, not inflexible. It also means being realistic (not too low or too high) rather than unrealistic.

In which of the following businesses is the business owner usually responsible for setting prices:

• Walmart

• Sears

• Java Joe’s Coffee Shop

• Macy’s

Answer explanation

. In small companies, such as a coffee shop, the owner is more likely to be in charge of pricing. Walmart, Sears, and Macy’s are all large companies that have departments responsible for the pricing function.

In which of the following businesses would a separate department most likely be responsible for establishing prices:

• Small boutique

• Local clothing store

• Chain store

• Hair salon

Answer explanation

Large companies usually have departments responsible for the pricing function. The owners of small boutiques, local clothing stores, and hair salons would most
likely be in charge of setting prices for their goods and services.