Handout 4

Question 1

The most important factor affecting the price of a product. The same principle also applies in the case of services. This will act as a benchmark for setting the price.

Answer 1

Cost of the Product

Question 2

The upper limit of the price range will depend on the utility the product has in the market.

Answer 2

The Demand for the Product

Question 3

One factor that affects price determination is the price of the competition charges for their product. Not only their price but for their products, its features, and other factors like distribution channels, promotions, and the like should also be studied.

Answer 3

Price of Competitors

Question 4

The government has a duty to protect its citizens from unfair practices and pricing. It may impose certain laws with regards to the pricing of a product.

Answer 4

Government Regulation

Question 5

used when the product or service is positioned to be luxurious and elegant. This strategy seeks to attract a certain type of clientele and project a degree of exclusivity. it seeks to position itself as elite and hopes to target the Class A market.

Answer 5

Prestige Pricing

Question 6

companies employ this strategy when the market is price insensitive (when the demand is high, and supply is low). Hence, products and services that have high demand usually set higher prices to achieve higher profit margins.

Answer 6

Market Skimming Pricing

Question 7

is used when setting a low initial selling price to attract many buyers for a large market share.

Answer 7

Market Penetration Pricing

Question 8

is a strategy used to attract buyers to purchase because of the reduced rate of the bundle compared to the total cost of the items if purchased individually.

Answer 8

Product Bundling Pricing

Question 9

are rates given to frequent or
high-volume users to attract them to purchase the
products.

Answer 9

Volume Discounts

Question 10

this strategy addresses the seasonality aspect of the tourism product. A price reduction is given to buyers who purchase services out of season when the demand is lower or when purchased ahead of time.

Answer 10

Discounts Based on Time of Purchase

Question 11

in this strategy, the company sells a product or service at two (2) or more prices, although the difference in price is not based on differences in cost but tries to maximize the amount that each customer pays.

Answer 11

Discriminatory Pricing

Question 12

is the practice of setting prices slightly lower than a whole number

Answer 12

Psychological Pricing

Question 13

offers discounts and short-term incentives especially during the introductory stage of the product or during special activities such as
anniversaries or festivals.

Answer 13

Promotional Pricing