Pricing Strategies and Types

Question 1

What are the pricing strategies in the INTRODUCTORY stage of the PLC?

Answer 1

Price Skimming, Penetration Pricing, Give-Away

Question 2

Penetration Pricing Strategy

Answer 2

using a low price with the goal being to get as many consumers as possible to try the product

• ex. new food products, health and beauty supplies, and beauty supplies

Question 3

Price Skimming Strategy

Answer 3

setting a high initial price for a product, to more quickly recoup the investment related to its development and marketing

• ex. top, or high-end, of the market

Question 4

Give-Away (Free Use)

Answer 4

Free trial period

• ex. offering a basic app for free to new customers (limited function but enough to induce customers to sign up for them)

Question 5

What is the pricing strategy in the LATER stage of the PLC?

Answer 5

Cost-Plus Pricing

Question 6

Cost-Plus Pricing

Answer 6

Determining the price based on cost and adding the profit margin on top of the cost

• ensures that the product costs are covered and the company earns a certain amount of profit

Markup: adding to the cost of a product (a form of cost-plus pricing)
Mark down: when products go on sale, but still make a profit

Question 7

What Pricing Strategies Reduce Prices?

Answer 7

Loss Leader Pricing, Everyday Low Pricing, Promotional Pricing, Price Bundling

Question 8

Loss Leader Pricing

Answer 8

Pricing one or more highly popular shopping items at a loss to attract customers to the store

ex. Walmart

Question 9

Everyday Low Pricing

Answer 9

The promise that consumers will always have low prices without having to wait for sales

ex. Walmart

Question 10

Promotional Pricing

Answer 10

Short-term tactic price reduction designed to get people into a store or to purchase more of a product

ex. Black Friday, Back to School Sales

Question 11

Price Bundling

Answer 11

Different offerings are sold together at a price that’s typically lower than the total price

ex. McDonald’s Extra Value Meal, Suitcase Bundle

Question 12

What Pricing Strategies psychologically lowers prices?

Answer 12

Odd-even Pricing/Psychological Appeal, Payment Pricing, Two-Part Pricing

Question 13

Odd-even Pricing/Psychological Appeal

Answer 13

The company prices a product a few cents or a few dollars below the next dollar amount

ex. $19.99

Question 14

Payment Pricing

Answer 14

Allowing customers to pay for products in installments

ex. paying in 4 equal interest-free payments

Question 15

Two-Part Pricing

Answer 15

Pricing one price level to access a portion of the offering with the option of paying a different price level if more access is needed

ex.
Tier 1 (Free): access to basic components
Tier 2 (Premium): access to advanced components

Question 16

What Pricing Strategies is Price Customization?

Answer 16

Price Differentiation, Dynamic Pricing

Question 17

Price Differentiation

Answer 17

Price differentiating or charging different customers different prices for the same product

ex. Senior Discount or Student Discount

Question 18

Dynamic Pricing

Answer 18

Automated adjustments in prices based on the customer, their browser, their online search patterns, and their past purchase behaviour

ex. Amazon reprices millions of items as frequently as every few minutes based on the market and you (the customer)

Question 19

What Pricing Strategy limits pricing alternatives?

Answer 19

Price Lining/Levels, Demand Backward Pricing

Question 20

Price Lining/Levels

Answer 20

Providing limited price levels for options in the same product category to make it easier to make a choice

ex. iPhone 13 Pro Max, iPhone 12 Pro, iPhone 13, iPhone 13 Mini

Question 21

Demand Backward Pricing

Answer 21

They start with the price demanded by consumers and create offerings at that price

ex. time-limited products like holiday products (Halloween costumes)

Question 22

What Pricing Strategy Manages Repeated Purchases?

Answer 22

Subscription-Based Pricing, Captive Pricing

Question 23

Subscription-based Pricing

Answer 23

Weekly, Monthly, or Annual fee to access an offering

ex. Netflix, Disney Plus, Dollar Shave Club

Question 24

Captive Pricing

Answer 24

Consumers must buy a given product because they are at a certain event or location, or they need a particular product because no substitutes will work

ex. Printer (makes 0% profit) and Ink Cartridges (puts a 300% mark up which customers will repeatedly buy)

Question 25

Additional Pricing Tactics

Answer 25

Prestige Pricing, Sealed big Pricing, Going-Rate Pricing

Question 26

Prestige Pricing

Answer 26

when a higher price is utilized to give an offering a high-quality image

Question 27

Sealed bid Pricing

Answer 27

Submitting monetary bids in sealed envelopes directly to the seller (e.g., B2B)

Question 28

Going-Rate Pricing

Answer 28

Buyers pay the same price regardless of where they buy the product or from whom

ex. wheat, gold, silver, government-regulated markets

Question 29

Price Lining

Answer 29

categorizes where there is little to differentiate two stores carrying the same product, but one store prices it higher because of the store’s perceived higher image but there’s little to differentiate between these products in terms of function

Question 30

Bids (on Online Auction Sites)

Answer 30

Gives customers a change to bid and negotiate prices with sellers until an acceptable price is agreed upon

ex. eBay