What is the term for a situation where a seller sets a high introductory price for a new product, to attract buyers who have a strong desire to get the product early, and who can afford it? The price then gets gradually reduced over time.
'Market skimming' is the correct answer.
An obvious example of this type of pricing behaviour is in the field of technology, where 'early adopters' will pay significantly more for a product, even although they know the price will drop subsequently. For commercially-used products, sometimes there is an urgent need for an organisa-tion to acquire - a topical example as I write (early 2022) is some new surveillance technology which is in the news and which some governments are desperate to have. In consumer markets, everyone's 'go-to' example is the next generation smartphone, especially Apple products.
Promotional pricing is a short-term price reduction (or 'two-4-one' type offer) to generate sales in the short-term, for example to clear stock, or because of a manufacturer financial support arrangement.
Price discrimination is where the seller sets different prices for different market segments. An ex-ample would be charging different rail fares in UK or mainland Europe based on customer age.
Contribution pricing is based on the notion that sales should cover costs, contributing to the busi-ness, without necessarily making a profit. For example, a large order may be accepted which will keep the workforce employed (retaining their skills as well as having a considerate / ethical outlook) to see the firm through a rough period.
Assume you calculate a selling price by adding a profit element onto costs. Assume the profit ele-ment is equivalent to 100% of costs.
Is mark-up or margin being described here?
When price is discussed as a % of costs to be added on, the term is 'mark-up'.
According to Lysons and Farrington, two authors recommended by CIPS, which of the following are cost-based pricing models, as opposed to market-driven pricing models? Choose two.
Both penetration pricing and promotional pricing begin with the market price. Marginal pricing and rate of return pricing both look at the costs of doing something, and base their calculations on cost. These last two are therefore cost-based approaches to pricing.
What do we call the point when the supply firm makes neither a profit nor a loss ie where all costs are covered yet no profit is made?
Breakeven point. The firm breaks even: covers all of its fixed costs. At this point the firm has made neither a profit nor a loss, and hopefully is about to enter profitability.
The letters 'MEAT' stand for:
MEAT: Most economically advantageous tender
An approach to tendering which takes account not only of the selling price, but also other relevant factors.
