Question

Washburn Guitar maintains that each guitar it produces represents quality at the best possible price. Washburn has four price points: (1) entry level at $349 and below; (2) intermediate level at $1,000 and below; (3) professional level at $1,000 to $3,000; and (4) collectors level at $3,000 and above. Given that price often serves as a strong cue to quality, a potential Washburn customer could logically draw all but one of the following conclusions. Which conclusion is not logical?

a.Although Washburn builds quality into every guitar, in fact there are four different levels of quality.

b.Musicians seek to purchase instruments that meet the quality standards appropriate to their level of musical skill and competence.

c.Guitars in the collector's line are the ones built with the highest level of craftsmanship and quality possible.

d.Compromising on quality at the entry level will have little, if any, impact on perceptions of quality at the other three price points.

Although Washburn makes and sells guitars targeted toward four different market segments with four different price points, company executives have expressed the concern that low prices are hurting the perception of Washburn's quality. Within the context of this situation, which of one of the following statements is false?

a.The guitar market, like most markets, has customer segments that value different things.

b.There is nothing wrong with Washburn offering basic guitars at lower prices to the price-sensitive market segment, and souped-up guitars at higher prices to the market segment that seeks quality.

c.Since Washburn's four market segments likely value different things, it is perfectly acceptable for the company to charge customers in the different segments different prices for different guitars.

d.Washburn's concern that the lower-priced guitars are negatively influencing customers' perceptions of quality is not justified because price never serves as a cue to quality.

In establishing a manufacturer's suggested retail price (MSRP) and holding its retail distributors to a minimum advertised price (MAP), Washburn Guitar is using __________ to help manage its relationship with the retailers.

a.Preferential pricing.

b.Inferential pricing.

c.Referent pricing.

d.Net retail pricing.

Washburn's minimum advertised price (MAP) for retail distributors that sell Washburn guitars is intended to ensure that, at minimum, Washburn will __________.

a.Earn predatory profits.

b.Break even.

c.Dictate how its retail distributors run their own businesses.

d.Control all the advertising content of its retail distributors.

Answer 1

1. The correct option is d. Compromising on quality at the entry level will have little, if any, impact on perceptions of quality at the other three price points.

2. The correct option is d. Washburn's concern that the lower-priced guitars are negatively influencing customers' perceptions of quality is not justified because price never serves as a cue to quality.

3. The correct option is c. Referent pricing.

4. The correct option is b. Break even.

Do give a positive rating if you think this answer helped