ESSAY QUESTIONS / PROBLEMS

CHAPTER 15 Pricing and Setting the Right Price

ESSAY QUESTIONS

1. List the three categories of pricing objectives and the specific objectives included in each category. Then describe disadvantages of using each type of pricing objective.

2. When a marketing manager sets a price to meet pricing goals, the price established depends on several factors. Name and describe these determinants of price.

3. As a product moves through its life cycle, the demand for the product and the competitive conditions tend to change. For each stage in the product life cycle, discuss pricing strategies appropriate for that stage. Then describe how price interacts with the other three Ps of the marketing mix.

4. You are the marketing manager for a new athletic shoe company that offers trendy but functional shoes. You are in the process of deciding how to price your shoes. Using the four-step process of price setting, determine how you would achieve the right price.

5. List and define the three basic methods for setting a price on a new good or service. For each method name advantages and disadvantages of using that method.

6. Many sellers sell their products to customers that are geographically dispersed, resulting in significant freight costs. Define four types of geographic pricing tactics that can be selected by a marketing manager to moderate the impact of freight costs on distant customers. For each tactic defined, specify the circumstances that would prompt the selection of that particular pricing method, and then give specific examples of products that are commonly priced in that manner.

7. Marketing managers can use a wide variety of special pricing tactics to fine-tune prices. Name and define six of these special pricing tactics. For each tactic, give an example of a company, industry, or product that would use the tactic. Then give advantages and disadvantages of using each tactic.

8. You work for a luxury car manufacturer located in Canada. Unfortunately for your company, Canada has just gone into a recession, and you fear that sales of the luxury vehicles will drop dramatically as consumer confidence in the economy decreases. Using the two possible tactics for pricing during a recession, what could you do?

9. The E-Lam Corporation manufactures three types of laminating machines: portable, vending, and desktop. The joint costs of land leasing, production equipment leases, insurance, and so on are allocated on an equal basis to the three types of machines sold. Last year's sales figures and allocated joint costs follow. Should E-Lam stop selling its portable machine? Why or why not?

PROBLEMS

1. Last quarter the Xylo company sold 1,000 strapples for $1 each, the Yeti Company sold 600 strapples at $5 each, and the Zeta Company sold 400 strapples for $2.50 apiece. Assuming the three companies are the only firms competing in the strapple market, calculate unit and dollar market share for each company for last quarter.

2. In the following scenarios, calculate answers related to the way retailers tend to calculate markups.

a) A coffeemaker is sold for $25. The retailer added $5 to the original cost. What is the markup percentage?

b) The cost of a calculator is $4 and the retailer applies a markup of $6. What is the markup percentage?

c) A bookstore retailer marks up all products by 25 percent. If a book costs the retailer $15, what will the final selling price be?

d) A gourmet foods retailer marks up all products by 75 percent. If the selling price of a specialty cheese is $12, what was the cost to the retailer?

3. Calculate the break-even quantity for TV-Terry.

Essay Question/Problem Solutions