4.00 Review Questions

1. 4.00 Review Questions

2. 1. Which pricing strategy sets prices lower than those of the competition? • A. Smoothing • B. Stretching • C. Penetration • D. Skimming

3. C.

4. 2. When prices go up or down, the change can affect how much of the sport/event product customers purchase. This is a general of • A. elasticity • B. market segmentation. • C. smoothing. • D. "total cost."

5. A.

6. 3. Why might a sport/event organization price entry fees for a marathon below the normal rate? • A. To establish their event as "luxury" • B. To encourage maximum participation • C. To create profits • D. To meet competitors prices

7. B.

8. 4. Which of the following is a company-focused pricing objective for sport/event products: • A. Offering the most discounts to customers • B. Offering the lowest prices • C. Enhancing image • D. Achieving a price customers feel is "fair"

9. C

10. 5. Which of the following is a tangible benefit of purchasing a surfboard: • A. It is the most popular brand on the market. • B. It gives you the opportunity to join a surfing club. • C. It allows you to spend time with your friends at the beach. • D. It has a wrist strap to keep it connected to you in the water.

11. D.

12. 6. In sports and entertainment marketing, the concept of price includes not only the cost of a ticket to an event but also the • A. value of the overall experience. • B. quality of the media advertising. • C. elements of the marketing plan. • D. location of the facility.

13. A.

14. 7. The additional cost of paying for parking and buying refreshments and programs is part of the overall ____________ of attending a concert. • A. benefit • B. price • C. goal • D. value

15. B.

16. 8. Wintergreen Ski Area knows that the area will be most successful if it bases its pricing structure on • A. costs associated with renovations. • B. what the market will bear. • C. total cost of the experience. • D. inelastic demand for skiing.

17. B.

18. 9. Yield management is a way that sport/event marketers address product pricing issues when they want to maximize revenue but have • A. below-market stock value. • B. unallocated resources. • C. limited capacity. • D. few distribution intermediaries

19. C.

20. 10. Which of the following is not a reason that pricing is the most critical element of the marketing mix: (4 points) • a. It is the least visible element of the mix. • b. It communicates even more than advertising. • c. It can be changed instantly. • d. It is a top concern of customers.

21. a It is the least visible element of the mix. Pricing is the most critical element of the marketing mix for marketers because it is the most visible element of the marketing mix for customers. Price communicates to customers even more than advertising does. And unlike advertising campaigns, which can take weeks or months to alter, price can be changed instantly. To customers, price is always a top concern.

22. 11. A customer’s opinion of the value of a sport/event product is based on (4 points) • a. advertising. c. perceived benefits. • b. education. d. price.

23. 11. c Perceived benefits. A customer’s opinion of the value of a sport/event product is based on perceived benefits. • Value is subjective. The same product can have varying values to different people. The reason that value is • unique to each customer is that the benefits of purchasing the product are based on that individual’s • perception. Advertising, education, and price may contribute to a customer’s perception of benefits, but none • is the basis for deciding value. (4 points)

24. 12. Which of the following is an intangible benefit of purchasing a sport watch: (4 points) • a. It fits comfortably on your wrist. c. It allows you to time your daily run. • b. It’s your favorite color. d. Your friends will be impressed by it.

25. 12. d Your friends will be impressed by it. Impressing friends is an intangible benefit of purchasing the sport watch because it cannot be measured by the five senses. One can look at the sport watch and see its color and its capability to time a daily run. One can also wear the sport watch and feel how comfortable it is. These are all tangible benefits of purchasing the watch. (4 points)

26. 13. Which of the following is a tangible benefit of purchasing a surfboard: (4 points) • a. It has a wrist strap to keep it connected to you in the water. • b. It is the most popular brand on the market. • c. It allows you to spend time with your friends at the beach. • d. It gives you the opportunity to join a surfing club.

27. 13. a It has a wrist strap to keep it connected to you in the water. The wrist strap is a tangible benefit of purchasing the surfboard because it can be measured by the five senses. Owning a popular board, spending time with • friends at the beach, and joining a surfing club are all intangible benefits because they are measured by the way • one feels. (4 points)

28. 14. Pricing sport/event products is unique because of the (4 points) • a. wide variety of products. c. intangible benefits. • b. tangible benefits. d. extremely high demand.

29. 14. d Extremely high demand. Pricing sport/event products is unique because of the extremely high demand. The • widespread popularity of sports (particularly professional sports) and entertainment has created this high • demand for sport/event products. It has pushed ticket prices for sports and events sky-high in recent years. • Wide variety and tangible and intangible benefits are not unique to sport/event pricing. They are elements that • can be found in any type of pricing. (4 points)

30. 15. Pricing objectives are important because they determine (4 points) • a. perceived benefits. c. “total cost.” • b. pricing strategies. d. market demand.

31. 15. b Pricing strategies. Pricing objectives are important because they determine pricing strategies. When pricing • their products, sport/event marketers must keep in mind exactly what they are trying to achieve. Before • determining price, they must ask themselves, “What result can the organization expect to achieve because of • this price?” Pricing objectives may have an effect on perceived benefits, “total cost,” and market demand, but • they are not a determining factor. (4 points)

32. 16. Which of the following is a company-focused pricing objective for sport/event products: (4 points) • a. Achieving a price customers feel is “fair” • b. Offering the lowest prices • c. Offering the most discounts to customers • d. Enhancing image

33. 16. d Enhancing image. Pricing products in a way that will enhance their image is a company-focused pricing • objective because it is concerned only with what the company is trying to achieve for itself. Other company focused • pricing objectives include covering costs and creating profits. Achieving prices that customers • consider “fair” and offering the most discounts are customer-focused pricing objectives. Offering the lowest • prices is a competition-focused pricing objective. (4 points)

34. 17. Why might a sport/event organization price entry fees for a marathon below the normal rate? (4 points) • a. To meet competitors’ prices c. To encourage maximum participation • b. To establish their event as “luxury” d. To create profits

35. 17. c To encourage maximum participation. A sport/event organization might price entry fees for a marathon below • the normal rate to encourage maximum participation in the race. Lower fees would not meet competitors’ • prices since the fees would be less expensive than for other marathons. Also, lower fees would not establish the • event as “luxury” or create profits. Only higher fees would do

36. 18. Which member of the distribution channel has the biggest impact on the price of a sport/event product? (4 points) • a. Retailer c. Wholesaler • b. Manufacturer d. Customer • .

37. 18. a Retailer. Retailers have the biggest impact on the final price of a sport/event product because they control the • final markup. All prices are set to cover costs for each member of the distribution channel, including • manufacturers and wholesalers, but retailers have a bigger impact since they have the final say on price. • Customers have an effect on pricing as well, but not as much as retailers do. (4 points)

38. 19. Which of the following is an effect of distribution on the price of a sport/event product: (4 points) • a. Prices are lower for convenience. c. Prices are higher in nontraditional channels. • b. Prices are higher at retail stores. d. Prices are lower for better facilities

39. 19. b Prices are higher at retail stores. Prices are higher at retail stores because retailers mark up prices before • selling sport/event products to customers. Prices are lower in nontraditional channels of distribution that skip • retailers because customers do not have to pay the final retail markup. Prices are also higher for convenience • and for better facilities because customers value those benefits. (4 points)

40. 20. Rent, equipment, salaries, and maintenance are expenses known as __________ costs. (4 points) • a. variable c. stable • b. total d. fixed

41. 20. d Fixed. Expenses that stay the same no matter how much of a sport/event product is being produced are called • fixed costs. These costs include expenses such as rent, equipment, salaries, and maintenance. Variable costs • are expenses that change along with the amount of production. Total costs are the sum of fixed and variable • costs. Stable costs accurately describes fixed costs, but it is not the correct term. (4 points)

42. 21. Materials, packaging, and advertising are expenses known as __________ costs. (4 points) • a. variable c. unstable • b. total d. fixed

43. 21. a Variable. Expenses that change along with the amount of production are called variable costs. These costs • include expenses such as materials, packaging, and advertising. Fixed costs are expenses that stay the same • no matter how much of a sport/event product is being produced. Total costs are the sum of fixed and variable • costs. Unstable costs accurately describes variable costs, but it is not the correct term. (4 points)

44. 22. Customers are more likely to buy sport/event products at lower prices rather than higher ones. This is a general rule of • (4 points) • a. market segmentation. c. promotion. • b. market demand. d. competition.

45. 22. b Market demand. Market demand is the amount of a product that customers are willing to purchase at a certain • price. As a general rule, customers are more likely to buy products at lower prices rather than at higher ones. • Market segmentation is the process of dividing the market into groups of people who share common • characteristics. Promotion is a marketing function used to communicate information about products. Competition • is the rivalry between businesses to attract customer dollars. (4 points)

46. 23. When prices go up or down, the change can affect how much of the sport/event product customers purchase. This is the general principle of (4 points) • a. market segmentation. c. elasticity. • b. “total cost.” d. smoothing.

47. 23. c Elasticity. Price elasticity is a measure of how sensitive customers are to changes in price. It gauges the • relationship between market demand and price. Market segmentation is the process of dividing the market into • groups of people who share common characteristics. “Total cost” is a concept that customers’ perception of • overall value is linked to all the expenses involved in attending an event, including expenses that are not under • marketers’ control. Smoothing is the process of dividing a product into different segments for customers. • (4 points)

48. 24. Ticket prices for the World Series increase dramatically, but all the games still sell out. The price change had little to no impact on sales. This is an example of __________ demand. (4 points) • a. elastic c. smoothing • b. unitary d. inelastic

49. 24. d Inelastic. An inelastic demand means that price changes have little to no impact on product sales. The demand • for World Series tickets is inelastic because it doesn’t change according to price. An elastic demand means that • small price changes have a big impact on product sales. A unitary demand means that changes in price create • proportionate changes in product sales. Smoothing is the process of dividing a product into different segments • for customers. (4 points)

50. 25. A hockey team raises prices for soft drinks at its arena by 25 cents per cup. They sell half as many soft drinks as they did before the price change. The small price change had a big impact on sales. This is an example of __________ demand. • (4 points) • a. elastic c. smoothing • b. unitary d. inelastic