namibia UniVERSITY OF SCIEnCE AnD TECHnOLOGY

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1 namibia UniVERSITY OF SCIEnCE AnD TECHnOLOGY FACULTY OF HEALTH AND APPLIED SCIENCES DEPARTMENT OF MARKETING & LOGISTICS QUALIFICATION: BACHELOR OF MARKETING QUALIFICATION CODE: 07BMAR LEVEL: 7 COURSE CODE: PPM712S SESSION: JANUARY 2017 COURSE NAME: PRODUCT PRICING MANAGEMENT PAPER: THEORY DURATION: 3 HOURS MARKS: 100 SUPPLEMENTARY/ SECOND OPPORTUNITY EXAMINATION QUESTION PAPER EXAMINER(S) MR. I. MUBWANDARIKWA MODERATOR: MR. ALBERT MUTONGA MATONGELA INSTRUCTIONS 1. This paper consists of two (2) sections (A & B) 2. Answer ALL questions 3. Use the tables provided on page [10] to answer Question 1: Detach and insert into your answer booklet 4. Write as legible as possible, and as precise as possible 5. Indicate your class lecturer's name on your answer sheet 6. Read each question carefully 7. Use a non-programmable calculator (STRICTLY NO USE OF CELLPHONE/MOBILE CALCULATOR) 8. Allocate your time appropriately THIS QUESTION PAPER CONSISTS OF 10 PAGES (Including this front page) ljp age

2 SECTION A [60 MARKS] QUESTION 1: True or False {15 X 1 = 15 Marks) 1.1 Operating expenses are the unusual expense of doing business. 1.2 Breakeven point and contribution margin are the same. 1.3 Price must be recognised as a statement of cost and not as a statement of value. TRUELFALSE 1.4 Pricing is considered to be key within the capitalist system of the free economy. 1.5 Congestion pricing is a system of surcharging users of public goods that are subject to congestion through excess demand such as higher peak charges for use at busy times. 1.6 If price goes down and revenue goes down, demand is inelastic. 1.7 Yield management is not a variable pricing strategy, based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed perishable resource such as airline seats or hotel room reservations or advertising inventory. 1.8 Selling price times one minus markup percent on selling price will equal the cost if markup is based on selling price. 1.9 Price floor is no demand above this price; Price ceiling is no profits below this price Psychological pricing is the practice of setting a different price for the same product in different segments to the market. 21P age

3 1.11 If price goes up or down and revenue stays the same, elasticity is unitary Status-quo pricing seeks to maintain existing prices or to meet the competition's prices Value pricing is not price set in accordance with customer perceptions about the value ofthe product/service When markup is based on selling price the cost is 100 percent When markups are based on cost the selling price is 100 percent. 3IP age

4 QUESTION 2: Multiple Choice (15 X 3 = 45 Marks) 2.1 Which of the following types of shopper has the highest price elasticity? a) personalizing consumer b) status-oriented consumer c) economic consumer d) convenience-oriented consumer 2.2 Which of the following pricing strategies is a form of leader pricing? a) early markdowns b) fair trade c) loss leaders d) unit pricing e) Value pricing 2.3 The starting point in developing a retail price strategy is: a) selecting a broad price policy b) choosing specific prices c) outlining a retail strategy mix d) developing objectives e) Price skimming 2.4 Which statement concerning price discrimination provision is correct? a) Price differences can be justified by differences in costs b) The act limits the powers of small retailers c) All discounts are illegal d) Only sellers' activities are restricted e) External valuation ofthe competition analysis 4jP age

5 2.5 An advantage of a late markdown policy is: a) lower markdowns are needed to sell merchandise than with an early markdown policy b) greater opportunity is given to sell merchandise at original prices c) a retailer's cash flow can be improved d) the freeing of selling space for new merchandise e) Increased advertising 2.6 Status-oriented consumers: a) perceive competing retailers as similar to one another and shop around for the lowest possible prices b) look for nearby locations and store hours c) perceive competing retailers differently d) seek retailers with strong assortments in the product categories under consideration 2.7 Prestige pricing is based on: a) markup pricing b) competition-oriented pricing c) cost-oriented pricing d) the price-quality association 2.8 If percent markup on cost and selling price is known one is able to compute the: a) Amount of markdown b) Amount of spoilage c) Cost d) Selling price at wholesale 51 P age

6 2.9 The markdown percent is calculated by: a) Amount of markdown divided by sale price b) Amount of markdown divided by original selling price c) Sale price divided by amount of markdown d) Original selling price divided by amount of markdown 2.10 Which of the following is a strategy that a manufacturer or wholesaler can use to legally control a good's final retail selling price? a) consignment selling b) refusing to sell to retailers that discount prices c) meeting with a discounter's competitors to discuss possible actions d) requiring discounting retailers to pay invoices upon delivery of merchandise e) Going rate pricing 2.11 Meme Nice Khoraeses bought a Brazilian Hair piece for N$1,500. Meme Khoraeses wants to markup the hair piece in her Hair Saloon for 55 percent based on selling price. The selling price of the hair piece should be: a) $2, b) $2, c) $3, d) $3, A pricing approach that is appropriate when a target market is price sensitive is: a) market penetration b) market skimming c) early recovery of cash d) the multistage approach e) Price lists can be printed at the same time as brochures 61P age

7 2.13 Tangeni Tjirare an upcoming electronics business in Katutura knows his goods are marked up 31 percent on cost. If an ipod costs Tangeni N$150, the selling price would be: a) N$ b) N$ c) N$ d) N$ Candice van Wyk, store manager for Jay's Appliance in Khomsdal, is having a difficult time placing a selling price on a plasma television that costs N$600. Bee knows his boss would like to have a 55 percent markup based on cost. The selling price should be: a) N$ b) N$ c) N$ d) N$ Which of the following pricing strategies is usually used for newspapers, candy, vending machine items, and foods on restaurant menus? a) leader pricing b) flexible pricing c) variable pricing d) customary pricing 71P age

8 SECTION B [40 MARKS] Answer all of the following questions. QUESTION 3 [15 Marks] Bream Rundu Ltd. is company in fish processing. The company has a total asset base of N$6,5 million. In 2015 the company had net profits after taxes of N$1,8 million. For 2015 the company targeted a return on investment of fifteen percent. In the fishing industry the average is 25%. You are required to do the following:- 3.1 Calculate Bream Rundu Ltd.'s return on investment. {7 marks) 3.2 Compare and comment on the answer arrived at in 4.1 against the Bream Rundu Ltd.'s targeted ROI. {4 marks) 3.3 Compare and comment on Bream Rundu Ltd.'s achieved ROI for 2015 against the industry's average. {4 marks) QUESTION 4 [15 Marks] Kobolt Incorporated, Trinity Holdings, Jerrings Ltd., and Trade Stone Holdings, four firms competing in an electronics industry. Consider the table below and complete it by calculating the missing figures. Comment on you findings. {Show all workings and answers must be rounded-off to 2 decimal places) Company Units Sold Unit Price Total Revenue Unit Revenue (N$) (N$) market market share(%) share(%) Kobolt ??? Incorporated Trinity Holdings ??? Jerrings Ltd ??? Trade Stone ??? Holdings TOTAL????? SI Page

9 QUESTION 5 [10 Marks] Pricing is always an important aspect of marketing, but it is especially crucial in times of inflation and recession. You are a Marketing Manager in a Namibian firm, and your Chief Executive Officer has tasked you to write an information note, half a page each, to the Board of Directors on:- 5.1 Two categories of special pricing tactics when the economy is characterized by high inflation (5 marks) 5.2 Two effective pricing tactics in a recession. (5 marks) 9IP age

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11 SECTION A: ANSWER SHEET Question 1: True or False (Put X or v) (15 X 1 = 15 Marks) TRUE FALSE SECTION A: ANSWER SHEET Question 2: Multiple Choice (Put X or v) (15 X 3 = 45 Marks) STUDENT NAME: STUDENT NUMBER: FULL-TIME/PART-TIME: LECTURER NAME: 10 I Page