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Exam 14: Developing and Pricing Goods and Services

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Question 101

Multiple Choice

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A competition-based pricing strategy called ________ involves one or more dominant firms establishing the pricing practices that all competitors in an industry follow.

A) skimming
B) penetration
C) target costing
D) price leadership

E) C) and D)
F) B) and D)

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Question 102

Multiple Choice

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Restaurants, like other businesses, often find that the best way to succeed in the market is to

A) listen to customers and adapt products to their needs.
B) create a product for which they could charge an exceptionally high price.
C) create a winning combination of advertising and personal selling for all of the stores in the chain.
D) open more stores in a single year than other food-service operators.

E) All of the above
F) A) and C)

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Question 103

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The most common classification of consumer goods and services is based on producer or manufacturer behavior in the market.

Brody asks you to calculate the break-even point for his firm. You respond that you will need the following information

Mini-Case Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked) . Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product. -Gourmet Pets feels its target market is more concerned with perceived quality than actual product cost. They also feel that the newness of this concept offers an opportunity to make high profits since they are the first firm to enter this market, so they face no direct competition. Their decision to charge a high price is consistent with the ________ strategy.

When a company establishes the price it charges for its products by determining the cost of production and then adding on a desired profit margin, it is known as target costing.

New-product commercialization includes promoting the product to distributors and retailers as well as developing strong advertising and sales campaigns.

Spokes sells high-quality bicycles and accessories. The store is known for a pleasant environment, friendly salespeople, and an excellent service department. All of these elements are part of the ________ offered by Spokes.

Brand loyalty refers to the degree to which customers are satisfied with a brand and are committed to further purchases.

During the ________ stage of the product life cycle sales reach a peak, profits are declining, and the number of competitors starts to decrease.

Lauren, owner and operator of Tastee Burgers, is working on a break-even analysis. The cost of pickles, onions, buns, ketchup, and meat would all be considered variable costs for her type of business.

Price, appearance, and reputation can influence a consumer's perceptions of quality.

Which of the following refers to how quickly or easily a given brand name comes to mind when a product category is mentioned?

Sales levels of Spokes mountain bikes are rising rapidly, profits are very high, and a growing number of competitors are taking aim at Spokes' market lead. Based on this information, Spokes mountain bikes are in which stage of the product life cycle?

Employees, not the firm's research and development department, are the number one source of ideas for new industrial products.

A brand includes practically all means of identifying a product.

Variable costs are costs that change with the level of production.

Successful firms coordinate pricing objective strategies with decisions regarding product design, packaging, branding, distribution, and promotion.

New-product failures are most often caused by excessively high prices.

Profits peak during the maturity stage of the product life cycle.