Chapter 9 Of Marketing

The correct answer is "Price". Price refers to the amount of money charged to a customer for a product or service. It is the monetary value that a customer pays in exchange for the benefits received from the product or service. Price is an important factor in determining the perceived value of a product or service and plays a crucial role in influencing consumer purchasing decisions.

The given correct answer is "Location pricing". This is because the price difference for the Veggie Chipotle burritos in Portland and Manhattan indicates that Chipotle is practicing location pricing. Location pricing involves charging different prices for the same product or service based on the geographical location. In this case, Chipotle is adjusting the price of the Veggie Chipotle burritos based on the different costs and market conditions in Portland and Manhattan.

The demand for milk is elastic in this example because a 1% increase in price led to a significant 10% reduction in demand. This indicates that consumers are responsive to changes in price and are willing to decrease their consumption when the price increases.

The cost of salary for managers is not a variable cost for Toyota in producing cars because it remains constant regardless of the number of cars produced. Variable costs, on the other hand, fluctuate with the level of production. The cost of steering wheel, seats, and paint are all examples of variable costs as they vary based on the number of cars being produced.

Kia is practicing market penetration pricing because they are selling their new model cars at prices much lower than the competition. Market penetration pricing involves setting low prices to attract customers and gain market share. This strategy is often used by companies entering a new market or launching a new product to quickly gain a foothold and increase sales volume. By offering lower prices, Kia aims to attract customers away from their competitors and establish themselves in the market.

If demand hardly changes with small changes in price, it means that the demand is not sensitive to price fluctuations. This indicates that the demand is inelastic. Inelastic demand means that consumers are not very responsive to changes in price and their purchasing behavior remains relatively constant, regardless of price changes.

Product bundling pricing refers to the practice of offering multiple products or services together as a package at a discounted price compared to buying them separately. In this scenario, the cost of purchasing training manuals separately from Aivea is $5000, and the cost of hiring an instructor separately is $3000. However, when both the manuals and instructor are purchased together, the cost is $6000. This indicates that there is a discount or special pricing offered when the manuals and instructor are bundled together, making it an example of product bundling pricing.

Target costing is a pricing strategy where a company determines the ideal selling price based on customer value considerations and then works backwards to determine the target cost that will ensure the price is met. This approach focuses on understanding customer needs and preferences and aligning the cost structure accordingly to achieve the desired profit margin. By setting the target cost, the company can identify areas where costs can be reduced or eliminated without compromising product quality or customer satisfaction. This allows the company to effectively manage costs and optimize profitability while delivering value to customers.

Honda's Acura brand practices value added pricing. This means that instead of discounting prices to match competitors, Acura focuses on highlighting the value that customers receive from their cars. By emphasizing the additional features, quality, and overall customer experience, Acura justifies their higher prices and positions themselves as a premium brand in the market. This strategy allows Acura to differentiate themselves from competitors and attract customers who are willing to pay a premium for the added value they offer.

Aivea is practicing cost plus pricing because they are adding a certain percentage (20%) of profit to the cost of hiring the consultant. This pricing strategy involves determining the cost of producing a product or service and then adding a markup to cover the desired profit margin. In this case, Aivea is calculating the cost of hiring the consultant ($400) and adding the desired profit of $80 (20% of $400) to arrive at the invoice amount of $480.

WalMart's strategy of offering the lowest possible prices and rarely having promotions aligns with the concept of Everyday low pricing. This approach focuses on consistently offering low prices to customers, rather than relying on temporary discounts or sales. By adopting this strategy, WalMart aims to attract customers who value affordability and convenience, while also maintaining a competitive edge in the market.

Value-based pricing is a pricing model where the company determines the price of a product or service based on the perceived value it provides to the buyer, rather than the cost of producing it. This approach focuses on understanding the customer's perception of value and pricing the product accordingly, which allows the company to capture a fair share of the value it delivers. By considering the buyer's perception of value, the company can align its pricing strategy with the customer's willingness to pay, leading to increased customer satisfaction and potentially higher profits.

High-low pricing is a strategy where a company sets higher prices for its products on a regular basis but frequently offers promotions or discounts to lower the prices temporarily on selected items. This approach aims to create a perception of value by giving the impression of getting a good deal during the promotional periods. By using this strategy, companies can attract customers with lower prices while still maintaining higher profit margins during non-promotional periods.

Apple was using market skimming pricing strategy when they introduced iPhones at $500 and then gradually reduced the price to $200. Market skimming pricing involves setting a high initial price for a product and then gradually lowering it over time. This strategy is often used for innovative products with high demand, allowing the company to maximize profits from early adopters before targeting a broader market with lower prices. In this case, Apple aimed to attract early adopters who were willing to pay a premium price for the latest technology, and then adjusted the price to appeal to a wider range of customers.

Optional product pricing is the correct answer because it refers to the strategy of offering optional features or accessories for an additional price. In this case, Honda is offering the base model of the Accord at $16,000 but charges extra for features like a moon roof and CD player. This allows customers to customize their car by choosing the optional features they desire, while also generating additional revenue for Honda.

Captive product pricing is the correct answer because Dell sells its printers at a low price to attract customers, but then charges a premium price for printer ink. This strategy is aimed at creating a dependence on their ink products, as customers who purchase their printers will need to continue buying Dell ink cartridges. By offering a low initial price for the printer and making profits from the higher-priced ink, Dell employs captive product pricing to maximize their revenue.

Predatory pricing refers to the strategy of selling products or services below cost with the intention of harming competitors or driving them out of business. This can be done to gain a higher market share and ultimately establish a monopoly. By offering prices that are unsustainable for competitors to match, the predatory firm aims to eliminate competition and then raise prices to recoup losses. This anti-competitive behavior is illegal in many jurisdictions as it can harm consumers and stifle innovation.

Cartons to pack products is not an example of fixed or overhead cost because it is a variable cost that changes based on the quantity of products being packed. Fixed or overhead costs, on the other hand, remain constant regardless of the level of production or sales. Rent, utilities, and interest on debt are all examples of fixed or overhead costs as they do not vary with the level of production.

In pure competition, firms are considered price takers because they have no control over the market price. They must accept the prevailing market price for their products or services, as determined by the forces of supply and demand. This means that individual firms have no ability to influence or manipulate prices, and they must adjust their production and pricing decisions based on the market conditions. Price takers have a perfectly elastic demand curve, meaning that any increase in price would result in a loss of all customers, and any decrease in price would result in an influx of customers.

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The given question asks for the term that does not describe the phenomenon of airlines varying their cost every hour or less. Allowance pricing does not accurately describe this phenomenon as it typically refers to offering discounts or allowances on the regular price of a product or service. On the other hand, revenue management, time pricing, and yield management all relate to the practice of adjusting prices based on factors such as demand, time, and maximizing revenue.