8 Questions
What pricing strategy is effective for capturing market share and attracting price-sensitive customers?
Low pricing
When is setting a high price for a new product effective?
When the business is introducing a new product with high demand
Why is setting prices so low that it drives competitors out of the market considered illegal in many countries?
Because it reduces the choice in the market
Which pricing strategy takes into account the customer's emotions, beliefs, and attitudes towards the product/service?
Emotional pricing
In a highly competitive market with many substitutes, what is the effect of lowering prices on revenue?
It will increase revenue
What pricing strategy may be appropriate for a product with a strong brand identity?
Price skimming
Why do businesses in highly competitive markets need to set their prices low?
To increase market share
What factor should a restaurant consider when setting menu prices?
Cost of ingredients, labour, rent, and other expenses
Study Notes
Pricing Strategies
- Penetration pricing is effective for capturing market share and attracting price-sensitive customers.
- Skim pricing is effective when setting a high price for a new product, especially if it is innovative or has a unique feature.
Unfair Competition
- Setting prices so low that it drives competitors out of the market is considered illegal in many countries, known as predatory pricing.
Psychology of Pricing
- Psychological pricing takes into account the customer's emotions, beliefs, and attitudes towards the product or service when setting prices.
Competitive Markets
- In a highly competitive market with many substitutes, lowering prices can lead to a decrease in revenue due to the elasticity of demand.
Brand Identity
- Premium pricing may be appropriate for a product with a strong brand identity, as customers are willing to pay a premium for the brand reputation.
Competitive Market Pressures
- Businesses in highly competitive markets need to set their prices low to stay competitive and avoid losing market share.
Pricing Considerations
- A restaurant should consider food costs, labor costs, overhead, and target profit margins when setting menu prices.
Test your knowledge about different pricing strategies used by businesses for new products and services. Learn about the advantages and disadvantages of setting high and low prices during the introduction of a product or service to the market.
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