Target Return Pricing and Psychological Pricing Quiz

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Which pricing strategy involves pricing a new product only marginally above its unit cost, with the objective of capturing a large part of the market at an early stage?

Price Skimming

Promotional Pricing

Penetration Pricing (correct)

Mark-up Pricing

What is the major disadvantage of penetration pricing?

It can be difficult to raise prices later on

It can lead to a perception that the product is of low quality

It can prolong the recovery period for research, development, advertising, and promotion costs (correct)

It can discourage would-be competitors from entering the market

Which pricing strategy involves pricing a product at a range below its unit cost but higher than its unit variable cost?

Going Rate Pricing

Predatory Pricing

Marginal Pricing (correct)

Price Lining

Which pricing method is premised on the theory that consumers will perceive products with odd price endings as lower in price than they actually are?

Odd or Psychological Pricing Signup and view all the answers

What is the biggest weakness of the 'Prize Time' pricing strategy?

The inclusion of unit sales in determining the product's mark-up price Signup and view all the answers

Which pricing method involves reducing the number of price points on merchandise to as little as possible, in extreme cases to only one price point?

Price Lining Signup and view all the answers

What pricing strategy involves reducing the number of price points on merchandise to as little as possible?

Price Lining Signup and view all the answers

Which pricing strategy disregards the unit cost of a product and capitalizes on high value perception or brand reputation?

Prestige Pricing Signup and view all the answers

In which pricing strategy is the selling price much higher than the unit cost of the product or service?

Skimming Pricing Signup and view all the answers

What pricing strategy involves pricing a product below its unit cost but above its unit variable cost to outmaneuver competition?

Marginal Pricing Signup and view all the answers

Which pricing strategy justifies not covering all fixed costs by considering them as 'sunk' and focuses on expanding customer base?

Marginal Pricing Signup and view all the answers

What type of pricing strategy aims to charge a high initial price and then gradually reduce it over time to attract different customer segments?

Penetration Pricing Signup and view all the answers

What is the primary purpose of target return pricing?

To recover a certain portion of the manufacturer's investment every year Signup and view all the answers

Which of the following is a key weakness of target return pricing?

It has the same weakness as mark-up pricing Signup and view all the answers

What is the primary purpose of odd pricing or psychological pricing?

To take advantage of consumers' tendency to perceive odd-priced items as lower in price Signup and view all the answers

What is the key principle behind loss leader pricing?

To recover losses from low-priced 'loss leader' items through higher markups on other products Signup and view all the answers

Which of the following pricing strategies is most likely to be used for a new, innovative product with no direct competition?

Skimming pricing Signup and view all the answers

Which pricing strategy is most likely to be used by a company to rapidly gain market share in a highly competitive market?

Penetration pricing Signup and view all the answers