Podcast
Questions and Answers
What is the primary purpose of psychological pricing?
What is the primary purpose of psychological pricing?
- To take advantage of consumer perceptions (correct)
- To match the prices of competitors
- To set a price that is sensitive to market share
- To set a price lower than the competition
In what situation is 'Going Rate Pricing' most effective?
In what situation is 'Going Rate Pricing' most effective?
- When there is a clear price leader who controls the game (correct)
- When the price is sensitive and needs to be adjusted frequently
- When there is intense competition with multiple price leaders
- When the product is unique and has no direct competitors
What is the main reason behind using odd prices in psychological pricing?
What is the main reason behind using odd prices in psychological pricing?
- Odd prices make the product stand out from the competition
- Consumers perceive odd prices to be lower than even ones (correct)
- Odd prices create a perception of higher quality
- Odd prices are easier to calculate mentally
Why might a company use 'Going Rate Pricing' strategy?
Why might a company use 'Going Rate Pricing' strategy?
What pricing strategy involves selling a product at a higher price due to high perceived value?
What pricing strategy involves selling a product at a higher price due to high perceived value?
In which pricing strategy does a firm charge a low price, often equal to costs, to penetrate a new market and gain market share?
In which pricing strategy does a firm charge a low price, often equal to costs, to penetrate a new market and gain market share?
What is the short-term high price strategy used to 'milk' the market for a period of popularity?
What is the short-term high price strategy used to 'milk' the market for a period of popularity?
Which pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
Which pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
What pricing strategy involves pricing a product below cost, therefore selling it at a loss?
What pricing strategy involves pricing a product below cost, therefore selling it at a loss?
Why might a firm use loss leading as a pricing strategy?
Why might a firm use loss leading as a pricing strategy?
In which strategy does a firm use a long-term high price due to high perceived value of the product?
In which strategy does a firm use a long-term high price due to high perceived value of the product?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
What are the problems associated with loss leading as a pricing strategy?
What are the problems associated with loss leading as a pricing strategy?
In which pricing strategy does a firm price a product below cost to attract customers for other products?
In which pricing strategy does a firm price a product below cost to attract customers for other products?
What is the pricing strategy used to penetrate a new market and gain market share by charging a low price, often equal to costs?
What is the pricing strategy used to penetrate a new market and gain market share by charging a low price, often equal to costs?
Which pricing strategy involves setting a long-term high price due to high perceived value of the product?
Which pricing strategy involves setting a long-term high price due to high perceived value of the product?
In which pricing strategy does a firm use a short-term high price to 'milk' the market for a period of popularity?
In which pricing strategy does a firm use a short-term high price to 'milk' the market for a period of popularity?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
In which pricing strategy does a firm price a product below cost to attract customers for other products?
In which pricing strategy does a firm price a product below cost to attract customers for other products?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
What is the pricing strategy used to penetrate a new market and gain market share by charging a low price, often equal to costs?
What is the pricing strategy used to penetrate a new market and gain market share by charging a low price, often equal to costs?
What pricing strategy involves selling a product at a higher price due to high perceived value?
What pricing strategy involves selling a product at a higher price due to high perceived value?
What is the short-term high price strategy used to 'milk' the market for a period of popularity?
What is the short-term high price strategy used to 'milk' the market for a period of popularity?
In which pricing strategy does a firm charge a low price, often equal to costs, to penetrate a new market and gain market share?
In which pricing strategy does a firm charge a low price, often equal to costs, to penetrate a new market and gain market share?
What pricing strategy involves pricing a product below cost, therefore selling it at a loss?
What pricing strategy involves pricing a product below cost, therefore selling it at a loss?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
In which pricing strategy does a firm use a long-term high price due to high perceived value of the product?
In which pricing strategy does a firm use a long-term high price due to high perceived value of the product?
Which pricing strategy involves setting a long-term high price due to high perceived value of the product?
Which pricing strategy involves setting a long-term high price due to high perceived value of the product?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
What is the strategy of using barrier pricing first to deter or remove competitors, and then increasing prices after cornering the market?
What pricing strategy involves selling a product at a higher price due to high perceived value?
What pricing strategy involves selling a product at a higher price due to high perceived value?
What is the pricing strategy used to penetrate a new market and gain market share by charging a low price, often equal to costs?
What is the pricing strategy used to penetrate a new market and gain market share by charging a low price, often equal to costs?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
In which pricing strategy does a firm use a short-term high price to 'milk' the market for a period of popularity?
In which pricing strategy does a firm use a short-term high price to 'milk' the market for a period of popularity?
What is the primary purpose of psychological pricing?
What is the primary purpose of psychological pricing?
Why might a firm use loss leading as a pricing strategy?
Why might a firm use loss leading as a pricing strategy?
What is the short-term high price strategy used to 'milk' the market for a period of popularity?
What is the short-term high price strategy used to 'milk' the market for a period of popularity?
What pricing strategy involves pricing a product below cost, therefore selling it at a loss?
What pricing strategy involves pricing a product below cost, therefore selling it at a loss?
Why might a company use 'Going Rate Pricing' strategy?
Why might a company use 'Going Rate Pricing' strategy?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
What pricing strategy involves reducing prices to remove or deter new entrants in a price-sensitive market?
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Study Notes
Psychological Pricing
- Primary purpose is to enhance perception of value and attract customers by creating the illusion of a lower price.
- Odd pricing strategy utilizes prices that end in .99 or .95 to make products appear cheaper than they are.
Going Rate Pricing
- Most effective in highly competitive markets where products are relatively undifferentiated.
- Companies may adopt this strategy to maintain market stability and avoid price wars.
High Perceived Value Pricing
- Involves selling products at a higher price due to the perceived value in customers' minds, often backed by branding or quality.
Market Penetration Pricing
- Firms charge low prices, often equal to costs, to penetrate new markets and gain market share, hoping to increase prices later once established.
Short-Term High Price Strategy
- Known as price skimming, aimed at 'milking' the market during a product's peak popularity or initial release.
Barrier Pricing
- Strategy where prices are initially set lower to deter new entrants, followed by price increases after achieving market control.
Loss Leading Strategy
- Pricing products below cost to attract customers for other items, effectively driving traffic to stores or services.
- Can sometimes lead to issues with profitability and perceived brand value.
Deter New Entrants Strategy
- Involves reducing prices to discourage new competitors from entering the market, maintaining dominance for established firms.
Problems with Loss Leading
- Risks include potential financial losses and difficulties in sustaining the business model if customers only purchase loss leaders.
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