Commercial Applications
A company launches a new product in the market with the following conditions:
(i) The product is priced significantly higher than competitors.
(ii) The target market is affluent consumers who value exclusivity.
(iii) The product is heavily promoted as a luxury item.
Which pricing strategy is the company likely using?
- Penetration Pricing
- Cost-Plus Pricing
- Skimming Pricing
- Parity Pricing
Answer
Skimming Pricing
Reason — Under skimming pricing, a very high price is set so that in the initial stages the cream of demand may be skimmed. The aim is to 'sell to classes' who don't care how much they pay for a novel product. Since the company is targeting affluent consumers, charging a higher price than competitors and promoting the product as a luxury item, this matches the skimming pricing strategy.
Related Questions
Which stage of the product life cycle is marked by falling costs and rising revenues?
- Introduction stage
- Growth stage
- Maturity stage
- Saturation stage
The usual source for new products is ……………
- Marketing research
- R&D
- Accidental discoveries
- A variety of sources including customers, competitors
Which stage of the product life cycle is most likely represented by the products in "D category" in the image below?
- Introduction
- Growth
- Maturity
- Decline
Assertion (A): The decline stage of the product life cycle is characterized by a decrease in sales and market share.
Reason (R): Companies should invest heavily in marketing and innovation during the decline stage to revive the product's growth.
- A is true but R is false
- A is false but R is true
- Both A and R are true and R explains A.
- Both A and R are true but R does not explain A.