Future Business Leaders of America (FBLA) Advertising Practice test

Offering free oil changes for the first three years with a new vehicle is an example of:

1. price competition

2. nonprice competition

3. psychological pricing

4. price skimming

The correct answer is: price competition

Offering free oil changes for the first three years with a new vehicle exemplifies nonprice competition. In this scenario, the manufacturer is not competing solely on price but rather enhancing the value proposition of the vehicle by providing an additional service at no cost. This strategy focuses on aspects such as customer satisfaction, quality of service, and overall ownership experience, which can differentiate the brand from competitors. Nonprice competition often involves enhancing product features, customer service, and warranties to attract customers without directly altering the price. Offering complimentary services like oil changes emphasizes the added benefits of purchasing the vehicle and can create customer loyalty and satisfaction, setting it apart from competitors who may only compete on the basis of price. In contrast, price competition would involve reducing the selling price of the vehicle to lure customers. Psychological pricing would relate to strategies where the price is set according to what might trigger a buying impulse. Price skimming involves setting a high initial price for a product and then gradually lowering it, which is not applicable in this scenario.