True/False
Indicate whether the sentence or statement is true or
false.
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1.
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Perceived, as opposed to real, product quality has no bearing on pricing
strategy
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2.
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Pricing
of products that appeal to a mass market is less challenging than pricing of products that appeal to
a niche market.
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3.
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Penetration pricing is the opposite strategy to market skimming pricing.
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4.
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One of
the problems with gathering data from consumers is that what they say they will do does not always
translate into actual behaviour.
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5.
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A
hotel, for example, has nothing to lose by selling a room for even one dollar more than its variable
costs.
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6.
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Strong
loyalty programs (e.g., Air Miles, Aeroplan) can make it very difficult for a competitor to use
competition-oriented or going-rate pricing.
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7.
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In a
product-bundle pricing strategy, it is unwise to include products that the consumer would not
normally purchase.
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8.
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Yield
management basically uses price to balance the market conditions of supply and demand. T
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Multiple Choice
Identify the letter of the choice that best
completes the statement or answers the question.
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1.
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Banff
Mount Norquay ski area has been innovative by a. | no longer imposing its timetable on
customers. | b. | selling half-month
ski tickets. | c. | increasing its
marketing research through the use of computer touch screens. | d. | adopting a strong loyalty
program. | | |
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2.
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Pricing
decisions may be made to deliberately discourage consumption. The best example of an
organization that may adopt such a strategy would be a. | Banff Mount Norquay. | b. | Walt Disney World. | c. | Four Seasons Hotels and Resorts. | d. | Parks Canada. | | |
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3.
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A
“tactical price reduction” a. | should only be used during the decline stage of the product
life cycle. | b. | is a day-to-day
pricing technique. | c. | is only beneficial to the organization if they are
utilizing all-inclusive pricing. | d. | requires careful consideration of costs, and significant
lead time. | | |
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4.
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A
consumer’s first indication of perceived product quality usually comes from a. | price. | b. | location. | c. | branding. | d. | word-of-mouth. | | |
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5.
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Key
factors in determining pricing decisions include a. | production costs, profit maximization, and social
responsibility. | b. | intermediaries in the distribution channel, buyer
perceptions, and production costs. | c. | maximizing market share, tactical pricing, and product
quality image. | d. | legal and
regulatory issues, fractional ownership, and niche marketing. | | |
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6.
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The
economic model of supply and demand suggests that more suppliers will enter the market if prices are
high, and buyers will purchase more if the price is low. Which of the following statements also
is true? a. | This provides a
very useful mathematical model for determining prices. | b. | This model is of limited use because it assumes that
consumers are unaware of all the options. | c. | The model is the foundation for yield
management. | d. | As a result of
consolidation in many sectors of hospitality and tourism, this model is less useful than may have
been the case when there were many small providers. | | |
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7.
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The
most appropriate pricing strategy for a product that will have a very short life cycle, such as the
Olympic Games, is a. | going-rate
pricing. | b. | prestige
pricing. | c. | market
skimming. | d. | promotional
pricing. | | |
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8.
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Price
elasticity a. | can be calculated
by percent change in quantity demanded divided by percent change in price. | b. | can be affected by customers’ perceptions of
uniqueness of the product. | c. | suggests that as prices fall, demand will
rise. | d. | All of the above
are true. | | |
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9.
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Premium
pricing, value-for-money pricing, and undercut pricing are three strategic approaches to pricing and
positioning. Which of the following statements is true? a. | Undercut pricing can lead to market saturation and,
ultimately, reduced sales and overall profits. | b. | Premium pricing may be an appropriate strategy for an
organization that wants to grow their market share. | c. | Value-for-money pricing emphasizes low cost and no-frills
products. | d. | Fixed costs must
be lower than variable costs in order to adopt an undercut pricing
strategy. | | |
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10.
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Psychological pricing is a technique that a. | may be ineffective if too many products with marginal
differences are priced too similarly. | b. | tends to work well with a promotional pricing
strategy. | c. | is a cost-based
method of setting prices. | d. | fails to consider buyer
sensitivity. | | |
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11.
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Discriminatory pricing a. | is another term for product-bundle
pricing. | b. | is often time- or
market-segment based. | c. | must be invisible to the consumer in order to avoid
resentment or lawsuits. | d. | is an appropriate strategy for a brand new tourism
product. | | |
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12.
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Yield
management attempts to maximize opportunities for the sale of an organization’s
________________ products. a. | over-stocked | b. | under-performing | c. | tangible | d. | perishable | | |
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Matching
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A) break-even analysis
| B) cost-based pricing | C) volume
discounting | D) discriminatory pricing | E) elasticity of
demand | F) market skimming | G) penetration
pricing | H) premium pricing | I)
prestige pricing | J) price lining
| K) price-quantity tradeoff | L) product-bundle
pricing | M) profit maximization | N) reference
price | O) strategic pricing | P) tactical
pricing | Q) undercut pricing | R) value-for-money
pricing | S) willingness to pay (WTP)
| T) yield | |
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1.
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acceptance of the higher cost of a better quality of product
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2.
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corporate objective that causes managers in organizations to make decisions in such a
way as to maximize profits
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3.
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the
sensitivity of customer demand to changes in the prices of services
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4.
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asking
potential customers what they would be willing to pay for the product
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5.
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setting
prices above market price, to reflect either the image of quality or the unique status of the
product
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6.
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charging medium prices and emphasizing that the product represents excellent value for
money at this price
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7.
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setting
prices lower than the competitions’ and using the price as a trigger to purchase
immediately
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8.
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adding
a certain dollar amount or percentage to the actual or estimated costs of a service to arrive at a
final price
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9.
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a
pricing technique that considers fixed and variable costs, customer volumes, and profit
margins
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10.
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pre-establishing price lines (levels) that the company feels confident will attract
customers
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11.
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setting
prices high to position a product at the upper or luxury end of the market
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12.
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this
policy of “skimming the cream” calls for setting high prices at the launch stage and
progressively lowering them as the product becomes better established
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13.
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pricing
at a lower level to get maximum sales and market share; used when an organization is trying to get
maximum distribution for the product or service in the initial stages
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14.
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grouping together a company’s products to promote them as a package
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15.
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selling
a product at two or more prices, despite the fact that the product costs are the same
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16.
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the
profit that is made on the sales of goods and services; calculated based on the number of customers,
how much they spend, and the number of products they buy
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17.
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a price
derived from market prices and the customer’s previous experience
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18.
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setting
prices early, in accordance with the long-term view of corporate strategy, product positioning, and
value for money in the marketplace
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19.
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making
short-term pricing decisions in response to changes in the marketing environment
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20.
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offering special prices to attract customers who agree to major
purchases
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