Retailing and E-tailing ©2015
Chapter 8: Pricing Strategies—Checkpoint Solutions
Checkpoint 8.1
1.
What role does price play in the success of a retailer?
Answer:
Setting the correct price for a product can result in many sales of that product.
Incorrect pricing may lead to lost sales and possible business failure. If a price is
too high, customers may not buy it. If a price is too low, the business may not
make a profit.
2.
Name the three levels of pricing.
Answer:
3.
List price, selling price, and manufacturer’s suggested retail price (MSRP).
Define controllable variables in retail pricing. Give examples.
Answer:
Controllable variables are those that the retailer can influence, such as company
goals, expenses, and product life cycle.
4.
Name two reasons a retailer would set the price for a new product very
high.
Answer:
If the products are priced high, it may be because the retailer has a limited
supply. The pricing needs to remain high for the retailer to recover costs. Or the
products may be priced artificially high because some people, early adopters, will
pay the higher price.
5.
Explain how supply and demand affect pricing.
Answer:
The law of supply and demand states that if supply is plentiful, prices are lower.
When supply is limited, customers are willing to pay more.
Checkpoint 8.2
1.
Name two pricing objectives used by most retailers.
Answer:
Most retailers set pricing objectives with the intention of either maximizing sales
or maximizing profit.
2.
What is the formula used to determine return on investment (ROI)?
Answer:
net profits
total assets
= return on investment
Copyright by Goodheart-Willcox Co., Inc.
May not be reproduced or posted to a publicly accessible website.
1
3.
What is the formula used to determine the base price of a product with a
percentage markup?
Answer:
4.
cost + (cost
markup percentage) = price
Identify the common types of psychological pricing adjustments.
Answer:
Some common psychological pricing strategies are odd pricing, even pricing,
prestige pricing, price lining, promotional pricing, and bundling.
5.
What is a loss leader? What is the purpose of using a loss leader?
Answer:
A loss leader is a product that is priced just at or below a profit level. Retailers
use this pricing strategy hoping that customers will buy other merchandise at the
regular price.
Copyright by Goodheart-Willcox Co., Inc.
May not be reproduced or posted to a publicly accessible website.
2