Different brands within a company's product line generally have different profit margins; higher price lines have higher profit margins. For example, Nike Variety tennis shoes have variable costs of $6 and sell for $24; whereas, Nike Wimbledon tennis shoes have variable costs of $10 and sell for $48. It must be true that:
A)Nike is using a cost-plus percentage-of-cost pricing strategy.
B)demand is unrelated to product quality.
C)Nike is using a price lining strategy.
D)demand is unrelated to price.

Question

Quizplus · Accepted Answer

Nike is using a price lining strategy where different product lines have different prices and profit margins. The higher-priced product line, Wimbledon tennis shoes, has a higher profit margin than the lower-priced Variety tennis shoes. This strategy is used to target different customer segments and offer products that meet different needs at different price points. This also implies that demand is related to price, as customers are willing to pay more for the higher-priced product.

Different Brands Within a Company's Product Line Generally Have Different