Question 1

A market-skimming pricing strategy should NOT be used for a new product when ________.
A) the product's quality and image support its higher price
B) enough buyers want the products at that price
C) competitors are unable to enter the market
D) competitors can undercut prices easily
E) producing a smaller number of goods is feasible

Accepted Answer

A market-skimming pricing strategy involves setting a high initial price for a new product and lowering the price as competitors enter the market. This strategy is effective when the product's quality and image support its higher price and when there are enough buyers willing to pay that price. However, this strategy should not be used when competitors can easily undercut the price or enter the market, as this will lead to a loss of market share. Additionally, producing a smaller number of goods may not be feasible with a market-skimming pricing strategy, as the goal is to generate high profits from each sale.

Question 2

Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?
A) by-product pricing
B) product bundle pricing
C) optional product pricing
D) captive product pricing
E) product line pricing

Accepted Answer

Product line pricing involves setting prices for an entire line of products based on cost differences, customer evaluations, and competitor pricing. By-product pricing involves pricing secondary or by-products to offset the costs of the main product. Product bundle pricing involves offering a discounted price for purchasing a bundle of products together. Optional product pricing involves pricing additional features or add-ons separately. Captive product pricing involves offering a low price for a main product and charging high prices for compatible products.

Question 3

For market skimming to be successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

Accepted Answer

Market skimming involves setting a high price for a newly introduced product with unique features or benefits, targeting early adopters who are willing to pay a premium price. However, to be successful, the costs of producing a smaller volume cannot be too high that they offset the advantage of charging more. Otherwise, the company would not generate enough profit to cover the initial R&D and production costs.

Question 4

For what types of products might marketers use market-skimming pricing?

Accepted Answer

The answer of For what types of products might marketers...

Question 5

Why might marketers use market-penetration pricing?

Accepted Answer

The answer of Why might marketers use market-penetration pricing?...

Question 6

Which of the following is true of market-penetration pricing?
A) It should be used when the product's quality and image support a high price.
B) It involves setting a high price for a new product to appeal to the elite in society.
C) It results in drawing in large numbers of buyers quickly, winning a large market share.
D) It is best used in conjunction with a market-skimming pricing strategy.
E) It results in the company making fewer and less profitable sales.

Accepted Answer

Market-penetration pricing involves setting a low price for a new product to attract a large number of buyers quickly and gain a large market share. This strategy is most effective when the product is highly price-sensitive and there is intense competition in the market. By setting a low price, the company can quickly penetrate the market and build brand awareness, which may lead to increased sales and profits in the long run.

Question 7

Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?
A) Electrowhip's competitors utilize social media for marketing their products.
B) Electrowhip sells products whose image and quality support high prices.
C) Electrowhip operates in a market with many competitors.
D) Electrowhip does not operate in a price sensitive market.
E) Electrowhip's products are intended to appeal to the elite in society.

Accepted Answer

The answer of Electrowhip, a company that manufacturers blenders and...

Question 8

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?
A) market-skimming pricing
B) market-penetration pricing
C) market-segmentation pricing
D) cost-plus pricing
E) captive-product pricing

Accepted Answer

Market-penetration pricing is a strategy used to quickly gain market share by offering a low price compared to competitors. This strategy is often used when introducing a new product into a mature market. By offering a lower price, the company can attract more customers and build brand loyalty. This strategy can help Whizz Corp. quickly gain market share for its new hybrid car.

Question 9

Companies that set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.
A) market-skimming pricing
B) market-penetration pricing
C) cost-plus pricing
D) inclusive pricing
E) exclusive pricing

Accepted Answer

Market-penetration pricing strategy involves setting a low price for a new product in order to attract a large number of buyers and a large market share. This strategy is commonly used when the company wants to quickly establish itself in the market or when there is intense competition.

Question 10

Companies set not a single price, but a pricing ________ that covers different items in its line and changes over time as products move through their life cycles.
A) by-product
B) structure
C) loop
D) cycle
E) bundle

Accepted Answer

Pricing structure refers to the overall system that a company uses to price its products, including the different prices for different items in its product line and how those prices change over time. A pricing structure can include different pricing tiers, discounts, and promotions, and is designed to reflect the company's overall pricing strategy.

Question 11

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________ pricing.
A) comparative
B) competitive
C) market-skimming
D) market-segmentation
E) cost-plus

Accepted Answer

Market-skimming pricing is often recommended for companies introducing new and innovative products to the market. It involves setting a high price initially and gradually lowering it over time as the product becomes more widely adopted. This strategy is effective when there is a relatively limited pool of early adopters who are willing to pay a premium price for new features or technologies. As the market becomes saturated and new competitors emerge, the company can lower its price to maintain market share. This is in contrast to market-penetration pricing, which involves setting a low price initially to quickly capture a large share of the market. This approach can be effective for companies with limited resources or those entering a highly competitive market segment.

Question 12

Refer to the scenario below to answer the following question(s).
Champion, Inc. is a manufacturer of lunch boxes, school bags, and school stationery. Charles Payton, the CEO of Champion, hopes to sell the products at a low price to penetrate the market quickly.
-Which of the following best supports a market-penetration strategy for Champion?
A) Production costs increase as sales volume increases.
B) It is very difficult for competitors to enter the market.
C) The cost of producing a smaller volume is negligible.
D) The quality of the products supports high initial prices.
E) The market for the products is highly price sensitive.

Accepted Answer

A market-penetration strategy involves selling products at a low price to quickly gain a large market share. This strategy is best suited for products in a market that is highly price sensitive, meaning that customers are very responsive to changes in price. Choices A, B, and D are not relevant to a market-penetration strategy, and choice C suggests that the cost of production is not a constraint on sales volume, which would not necessarily support a market-penetration strategy.

Question 13

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.
A) market-skimming
B) cost-plus
C) market-segmentation
D) market-penetration
E) competitive

Accepted Answer

This strategy is known as market-skimming, where companies set high prices to attract early adopters and then gradually lower the price to attract more price-sensitive customers.

Question 14

Which of the following is true of price skimming?
A) It is effective in situations in which competitors are able to undercut prices easily.
B) It can be profitably used when the product's quality and image support its price.
C) It involves underpricing products so that companies make larger sales.
D) It is ineffective in situations in which competitors are unable to enter the market easily.
E) It leads to a situation in which the company completes more, though less profitable, sales.

Accepted Answer

Price skimming is a strategy where a company sets a high price for a product during its introduction phase, with the goal of maximizing profits before competitors enter the market. This strategy can only be profitably used when the product's quality and image support its price. Since the product is new and innovative, consumers are willing to pay a premium price for it. Therefore, it is not about underpricing products, but rather about setting a high initial price. Competitors are unable to enter the market easily when there are high barriers to entry, such as high start-up costs, specialized knowledge, or patents. Price skimming is effective in these situations as it allows the company to cover its high development costs and earn a sizable profit.

Question 15

Differentiate between market-skimming and market-penetration pricing strategies. Explain the conditions within which they are effective.

Accepted Answer

The answer of Differentiate between market-skimming and market-penetration pricing strategies....

Question 16

When The Candy Store sets a low initial price in order to get its "foot in the door" and to quickly attract a large number of buyers, the company is using market-skimming pricing.

Accepted Answer

The scenario described is actually an example of penetration pricing, not market-skimming pricing.

Question 17

Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using?
A) market-penetration pricing
B) market-skimming pricing
C) competitive pricing
D) cost-plus pricing
E) product-line pricing

Accepted Answer

The answer of Midnight Magic, a perfume manufacturing company, plans...

Question 18

Pricing strategies tend to change and evolve as the average product passes through its life cycle.

Accepted Answer

Pricing strategies are not set in stone and may need to be adjusted throughout a product's life cycle as market conditions, competition, and consumer demand change. A new product may initially be priced high to recoup costs and establish a premium image, while a price reduction might be necessary to stimulate demand in the decline phase. Thus, pricing strategies tend to change and evolve over time.

Question 19

A market-penetration pricing policy should LEAST likely be used for a new product when ________.
A) the market is highly price sensitive
B) production and distribution costs fall as sales volume increases
C) the product's quality and image support a high price
D) a high price helps keep out the competition
E) there are few or no competitors in the market

Accepted Answer

A market-penetration pricing policy involves setting a low price for a new product to capture a large market share quickly. This strategy is typically used when a company wants to compete with established brands or when there are many competitors in the market. However, if the product's quality and image support a high price, a market-penetration pricing policy may not be appropriate as it could damage the product's reputation and positioning. Instead, a skimming pricing strategy (setting a high price initially and gradually lowering it over time) may be more appropriate for a new product with strong quality and image.

Question 20

In a bid to attract more customers in a market that has several competitors, Barrymore's Bakery slashed the prices of all its products by 50 percent. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using?
A) market-skimming pricing
B) market-penetration pricing
C) captive-product pricing
D) cash discount pricing
E) by-product pricing

Accepted Answer

Barrymore's Bakery is using market-penetration pricing, where they are lowering their prices to attract more customers and gain a larger market share. This strategy aims to promote rapid market adoption of a new product or service by offering it at a lower price than the competition.

Quiz 11: Pricing Strategies: Additional Considerations

A market-skimming pricing strategy should NOT be used for a new product when ________.

Which of the following product mix pricing strategies involves setting prices across an entire product range based on cost differences between the products, customer evaluations of different features, and competitors' prices?

For market skimming to be successful, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

For what types of products might marketers use market-skimming pricing?

Why might marketers use market-penetration pricing?

Which of the following is true of market-penetration pricing?

Electrowhip, a company that manufacturers blenders and electric whisks, has decided to use a market penetration pricing strategy. Which of the following, if true, proves their decision to be a wise one?

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal?

Companies that set a low price for a new product in order to attract a large number of buyers and a large market share are using the ________ strategy.

Companies set not a single price, but a pricing ________ that covers different items in its line and changes over time as products move through their life cycles.

Companies facing the challenge of setting prices for the first time can choose between two broad strategies: market-penetration pricing and ________ pricing.

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ________ pricing strategy.

Which of the following is true of price skimming?

Differentiate between market-skimming and market-penetration pricing strategies. Explain the conditions within which they are effective.

When The Candy Store sets a low initial price in order to get its "foot in the door" and to quickly attract a large number of buyers, the company is using market-skimming pricing.

Pricing strategies tend to change and evolve as the average product passes through its life cycle.

A market-penetration pricing policy should LEAST likely be used for a new product when ________.