Pricing Strategies

Question 1

Market-skimming pricing (price skimming)

Answer 1

Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Question 2

Market-penetration pricing

Answer 2

Setting a low price for a new product to attract a large number of buyers and a large market share.

Question 3

Product line pricing

Answer 3

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.

Question 4

Optional product pricing

Answer 4

The pricing of optional or accessory products along with a main product.

Question 5

Captive product pricing

Answer 5

Setting a price for products that must be used along with a main product, such as blades for a razor and games for a videogame console.

Question 6

By-product pricing

Answer 6

Setting a price for by-products to make the main product’s price more competitive.

Question 7

Product bundle pricing

Answer 7

Combining several products and offering the bundle at a reduced price.

Question 8

Discount

Answer 8

A straight reduction in price on purchases during a stated period of time or of larger quantities.

Question 9

Allowance

Answer 9

Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way.

Question 10

Segmented pricing

Answer 10

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Question 11

Psychological pricing

Answer 11

Pricing that considers the psychology of prices, not simply the economics; the price says something about the product.

Question 12

Reference prices

Answer 12

Prices that buyers carry in their minds and refer to when they look at a given product.

Question 13

Promotional pricing

Answer 13

Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales.

Question 14

Geographical pricing

Answer 14

Setting prices for customers located in different parts of the country or world.

Question 15

Market-skimming pricing (price skimming)

Answer 15

Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Question 16

FOB-origin pricing

Answer 16

A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

Question 17

Uniform-delivered pricing

Answer 17

A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.

Question 18

Zone pricing

Answer 18

A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

Question 19

Basing-point pricing

Answer 19

A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.

Question 20

Freight-absorption pricing

Answer 20

A geographical pricing strategy in which the seller absorbs all or part of the freight charges to get the desired business.

Question 21

Dynamic pricing

Answer 21

Adjusting prices continually to meet the characteristics and needs of individual customers and situations.