Question 1

After entering a market by using market-penetration pricing, a company can easily raise its price and maintain its market share.

Accepted Answer

Market-penetration pricing involves setting a lower price to gain market share quickly. If the company then raises its price, it may lose customers to competitors who offer similar products at a lower price. Therefore, it's not easy for a company to raise its price and maintain its market share after using market-penetration pricing.

Question 2

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 requires selling products at a low price to quickly gain market share. This is only effective if the market is price sensitive, which is indicated by option E. Option A, stating that production costs increase as sales volume increases, would be a disadvantage for a market-penetration strategy as it would make it difficult to maintain low prices. Similarly, option B, indicating that competitors find it difficult to enter the market, does not necessarily support a market-penetration strategy. Option C, stating that the cost of producing a smaller volume is negligible, may be helpful for a product that requires customization or has a limited market, but it does not directly support a market-penetration strategy. Option D, suggesting high initial prices for quality products, contradicts the low-price approach of a market-penetration strategy.

Question 3

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 is known as market-skimming pricing strategy. This strategy is often used for new, innovative products with little competition. The company sets a high initial price to recoup development costs and take advantage of consumer curiosity and willingness to pay a premium. After a period of time, the price is reduced to appeal to a wider market segment.

Question 4

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 strategy involves setting a high price for a new product in order to generate maximum revenue from the market segment willing to pay the high price. It is best suited when the product has unique features, is new to the market, and there is a high demand for the product. This strategy helps the company recover its initial investment quickly, but it may limit the size of the market.

Question 5

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 6

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 is the strategy of setting a low price for a new product in order to attract a large number of buyers and a large market share. This is often used to quickly establish a foothold in the market and compete against established competitors. Market-skimming pricing, on the other hand, involves setting a high price for a new product in order to maximize profits from early adopters before gradually lowering the price. Cost-plus pricing involves adding a markup to the cost of producing a product to determine its price, while inclusive pricing and exclusive pricing are not pricing strategies commonly used in the marketing industry.

Question 7

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 8

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

Accepted Answer

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

Question 9

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 charging a higher price for a new product to a smaller pool of customers who are willing to pay a premium for the innovation. However, if the cost of producing the smaller volume is too high, it will ultimately cancel out the advantage of charging more, making the strategy unsuccessful.

Question 10

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 by lowering its prices to attract more customers in a competitive market. This strategy allows for the firm to increase its market share and potentially gain more loyal customers who are attracted to the lower prices.

Question 11

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

Companies set a pricing structure that covers different items in its line and changes over time as products move through their life cycles.

Question 12

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 market penetration pricing, not market-skimming pricing. Market-skimming pricing involves setting high prices for a new product in order to maximize revenue from early adopters before gradually lowering the price to attract broader market segments.

Question 13

For a market penetration-price strategy to succeed, which of the following is LEAST likely to be true?
A) Production costs decrease as sales volume increases.
B) A low price triggers market growth.
C) Distribution costs decrease as sales volume increases.
D) Low prices must inhibit competition from entering the market.
E) The strategy can be changed quickly, to a higher-priced position, with no negative impact.

Accepted Answer

The answer of For a market penetration-price strategy to succeed,...

Question 14

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 quickly attract a large number of buyers and gain a significant market share. This strategy is often used to compete with existing products and to encourage customers to try a new product. It may result in lower profits per unit, but the higher sales volume can make up for it.

Question 15

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 price for a new product in order to maximize profits while demand is still high. However, if competitors can easily enter the market and undercut prices, this strategy may not be effective as it could lead to a significant loss of market share. Therefore, D is the correct answer as competitors can easily undercut prices.

Question 16

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 of setting a high price for a new product in order to skim maximum revenues layer by layer from the segments of the market willing to pay the high price. It works best when the product's quality and image support its price. This strategy allows companies to recoup their initial investment quickly before competitors enter the market with similar products.

Question 17

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 18

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 where a company sets a low price for their product in order to quickly gain market share. This strategy is effective when entering a mature market in developed countries as consumers are price-sensitive and the competition is high. By offering a lower price, Whizz Corp. can attract customers from competitors and gain a larger share of the market quickly.

Question 19

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

Accepted Answer

Pricing strategies are not static and tend to change as the product passes through different stages of its life cycle. For example, during the introduction and growth stages, the price may be set lower to attract more customers and gain market share, while during the maturity stage, the price may be increased to maximize profit as competition increases.

Question 20

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 to penetrate the market and gain market share. This strategy is effective when the market is highly price sensitive, production and distribution costs fall as sales volume increases, a high price helps keep out the competition or there are few or no 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 would undermine the product's image and perceived value.

Quiz 11: Pricing Strategies: Additional Considerations

After entering a market by using market-penetration pricing, a company can easily raise its price and maintain its market share.

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.

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

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.

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

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

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.

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.

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.

For a market penetration-price strategy to succeed, which of the following is LEAST likely to be true?

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

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

Which of the following is true of price skimming?

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?

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 ________.