Chapter 8: The Pricing of Services

A buyer's perception of value is considered a tradeoff between:
1. product value and psychic cost
2. total customer value and total customer cost
3. image value and energy cost
4. service value and monetary cost
5. personnel value and time cost
Total customer value consists of all of the following components except:
1. product value
2. service value
3. image value
4. time value
5. personnel value
Total customer cost consists of all of the following components except:
1. monetary cost
2. social cost
3. time cost
4. psychic cost
5. energy cost
Consumers exchange their money, time, and effort for the bundle of benefits the service offers. Theory suggests that consumers will have a ___________ that captures the value they place on these benefits.
1. lower price threshold
2. reservation price
3. consumer surplus
4. image value
5. product value
When pricing a service, the service provider should consider all of the following except __________.
1. demand considerations
2. cost considerations
3. customer considerations
4. product considerations
5. all the above should be considered
A consumer’s price sensitivity will increase as:
1. the perceived number of substitutes increase
2. switching costs increase
3. the shared costs for the expenditure increase
4. the perceived unique value of the service increases
5. the customer’s ability to build an inventory decreases
A consumer’s price sensitivity will increase as:
1. the perceived number of substitutes decrease
2. switching costs increase
3. the shared costs for the expenditure increase
4. the perceived unique value of the service increases
5. the customer’s ability to build an inventory increases
A consumer’s price sensitivity will decrease as:
1. the perceived number of substitutes increase
2. switching costs increase
3. the shared costs for the expenditure decreases
4. the perceived unique value of the service decreases
5. the customer’s ability to build an inventory increases
A consumer’s price sensitivity will decrease as:
1. the perceived number of substitutes increase
2. switching costs decrease
3. the shared costs for the expenditure increase
4. the perceived unique value of the service decreases
5. the customer’s ability to build an inventory increases
Which of the following statements about the pricing of services (compared to the pricing of goods) is false?
1. The demand for services tends to be more elastic than the demand for goods.
2. Cost-oriented pricing is more difficult for services.
3. Comparing prices of competitors is more difficult for service consumers.
4. Self-service is a viable competitive alternative.
5. Consumers are less able to stockpile services by taking advantage of discount prices.
Which of the following statements about the pricing of services (compared to the pricing of goods) is false?
1. The demand for services tends to be more inelastic than the demand for goods.
2. Cost-oriented pricing is more difficult for services.
3. Comparing prices of competitors is more difficult for service consumers.
4. Self-service is a viable competitive alternative.
5. Consumers are more able to stockpile services by taking advantage of discount prices.
Which of the following statements about the pricing of services (compared to the pricing of goods) is true?
1. The demand for services tends to be more elastic than the demand for goods.
2. Cost-oriented pricing is more difficult for services.
3. Comparing prices of competitors is less difficult for service consumers.
4. Self-service is not a viable competitive alternative.
5. Consumers are more able to stockpile services by taking advantage of discount prices.
Which of the following statements about the pricing of services (compared to the pricing of goods) is true?
1. The demand for services tends to be more elastic than the demand for goods.
2. Cost-oriented pricing is less difficult for services.
3. Comparing prices of competitors is less difficult for service consumers.
4. Self-service is a viable competitive alternative.
5. Consumers are more able to stockpile services by taking advantage of discount prices.
The mental energy spent by customers to acquire service is referred to as _____.
1. image costs
2. monetary price
3. energy costs
4. psychic costs
5. time costs
Brand equity is most similar to:
1. psychic value
2. image value
3. service value
4. product value
5. personnel value
If the negative effect of cross-price elasticity in which the increasing price of one service decreases the demand for another service are said to be __________.
1. unitary
2. substitutes
3. complementary
4. inelastic
5. elastic
If the positive effect of cross-price elasticity in which the increasing price of one service increases the demand for another service are said to be __________.
1. unitary
2. substitutes
3. complementary
4. inelastic
5. elastic
Which of the following is not a criteria for effective price discrimination?
1. the segments should be identifiable, and a mechanism must exist to price them differently.
2. different groups of consumers should have similar responses to price
3. segments should be large enough to be profitable
4. incremental revenues should exceed incremental costs
5. customers should not be confused
If the goal of the pricing strategy is to reduce the amount of perceived risk associated with the purchase and appeal to target markets that value certainty, then the appropriate pricing strategy would be:
1. relationship pricing
2. price bundling
3. mixed bundling
4. efficiency pricing
5. flat-rate pricing
Which one of the following is not a form of satisfaction-based pricing?
1. offering guarantees
2. benefit-driven pricing
3. flat-rate pricing
4. relationship pricing
5. all the above are forms of satisfaction-based pricing
The pricing strategy that charges customers for services actually used as opposed to overall "membership" fees is:
1. relationship pricing
2. price bundling
3. benefit-driven pricing
4. flat-rate pricing
5. efficiency pricing
The pricing strategy that enhances the firm's relationship with its targeted consumers and is a form of relationship pricing is:
1. activity-based costing
2. price bundling
3. benefit-driven pricing
4. flat-rate pricing
5. efficiency pricing
Southwest airlines appeals to economically-minded consumers who are looking for the best price by flying shorter, more direct routes to less congested, less expensive airports. Southwest Airlines practices:
1. relationship pricing
2. price bundling
3. benefit-driven pricing
4. flat-rate pricing
5. efficiency pricing
Traditionally, overhead in most service firms has been allocated to projects based on the amount of ____________ charged to complete the customer's requirements.
1. direct labor
2. fixed costs
3. time
4. number of employees
5. number of time sheet entries
The approach that allocates overhead to each project based on the activities undertaken to complete the project is called:
1. activity-based costing
2. price bundling
3. benefit-driven pricing
4. flat-rate pricing
5. efficiency pricing
Customer frustration resulting from receiving poor service is most similar to:
1. image costs
2. monetary price
3. energy costs
4. psychic costs
5. time costs
many services, the demand for medical services tends to be __________.
1. inelastic
2. elastic
3. substitute demand
4. complementary demand
5. price cross elastic demand
Effective boundary spanners enhance the __________ of services.
1. product value
2. service value
3. image value
4. time value
5. personnel value
Costs that are planned and are accrued during the operating period regardless of the level of production and sales are called:
1. fixed costs
2. direct variable costs
3. average costs
4. marginal costs
5. future costs
Costs such as direct labour and sales commissions are called:
1. fixed costs
2. variable costs
3. average costs
4. marginal costs
5. future costs
Charging customers different prices for essentially the same service is called:
1. price discrimination
2. supply and demand
3. complementary
4. substitutes
5. none of the above
The tasks in activity based costing are thought of as “users” of overhead and identified as:
1. fixed costs
2. cost drivers
3. variable costs
4. project costs
5. cost labor
Technique that allows consumers to either buy Service A and Service B together
or purchase one service separately is called:
1. long-term bundling
2. price bundling
3. mixed bundling
4. relations bundling
5. product bundling
Which pricing strategies encourage the customer to expand his/her dealings with the service provider?
1. relationship pricing
2. price bundling
3. benefit-driven pricing
4. flat-rate pricing
5. efficiency pricing
Studies suggest that price is more likely to be used as a cue to quality under the following conditions?
1. when price is the primary differential information available
2. when alternatives are heterogeneous
3. prior to purchase
4. when comparative price differences are relatively large
5. all of the above

Chapter 8: The Pricing of Services

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