25 Lecture - General Pricing Approaches

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25 Lecture

MGT301

Midterm & Final Term Short Notes

General Pricing Approaches

General pricing approaches refer to the strategies and methods used by businesses to set the price of their products or services. These approaches include cost-based pricing, value-based pricing, competition-based pricing, and penetration pricin


Important Mcq's
Midterm & Finalterm Prepration
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  1. Which pricing approach considers the perceived value of the product to the customer? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: b

  2. Which pricing approach involves setting prices based on the prices of competitors? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: c

  3. Which pricing approach involves setting low prices to gain market share? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: d

  4. Which pricing approach involves setting prices based on the cost of production? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: a

  5. Which pricing approach is most suitable for luxury products? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: b

  6. Which pricing approach is most suitable for new products? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: d

  7. Which pricing approach is most suitable for mature products in a highly competitive market? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: c

  8. Which pricing approach is based on the principle that prices should be set to cover the costs of production and a reasonable profit margin? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: a

  9. Which pricing approach focuses on the benefits that the product provides to the customer? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: b

  10. Which pricing approach is most suitable for products that have a high production cost? a. Cost-based pricing b. Value-based pricing c. Competition-based pricing d. Penetration pricing Answer: a



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is a pricing strategy? Give an example. Answer: A pricing strategy is a plan that outlines how a company sets the prices of its products or services. Example: Skimming pricing strategy.

  2. What is the difference between cost-plus pricing and value-based pricing? Answer: Cost-plus pricing is based on adding a markup to the cost of producing a product or service, while value-based pricing is based on the perceived value of the product or service to the customer.

  3. What is dynamic pricing and how does it work? Answer: Dynamic pricing is a pricing strategy that involves changing the price of a product or service based on various factors, such as demand, competition, and time of day.

  4. What is price skimming and why is it used? Answer: Price skimming is a pricing strategy in which a company sets a high price for a new product or service and then gradually lowers the price over time. It is used to maximize revenue in the early stages of a product's life cycle.

  5. What is penetration pricing and why is it used? Answer: Penetration pricing is a pricing strategy in which a company sets a low price for a new product or service to attract customers and gain market share. It is used to quickly establish a foothold in a new market.

  6. What is psychological pricing and give an example? Answer: Psychological pricing is a pricing strategy that uses pricing cues to influence customers' perceptions of a product's value. Example: setting a price at $9.99 instead of $10.00.

  7. What is price bundling and why is it used? Answer: Price bundling is a pricing strategy in which a company offers two or more products or services at a single, lower price. It is used to increase sales volume and encourage customers to try new products.

  8. What is value pricing and how is it different from price skimming? Answer: Value pricing is a pricing strategy that focuses on offering a product or service that provides superior value to the customer. It is different from price skimming, which focuses on maximizing revenue in the early stages of a product's life cycle.

  9. What is yield management and how is it used in pricing? Answer: Yield management is a pricing strategy used by service-based businesses, such as airlines and hotels, to maximize revenue by dynamically adjusting prices based on demand.

  10. What is the difference between price elasticity of demand and price inelasticity of demand? Answer: Price elasticity of demand is a measure of how sensitive customers are to changes in the price of a product or service, while price inelasticity of demand refers to situations where customers are not very sensitive to changes in price.

General pricing approaches refer to the different ways in which businesses set prices for their products or services. These approaches are influenced by various factors such as market conditions, competition, cost of production, and customer demand. Some of the common general pricing approaches include cost-plus pricing, value-based pricing, penetration pricing, skimming pricing, and psychological pricing. Cost-plus pricing involves adding a markup percentage to the cost of production to arrive at the selling price. Value-based pricing, on the other hand, considers the perceived value of the product or service by the customer and sets the price accordingly. Penetration pricing involves setting a low price to penetrate a new market, while skimming pricing involves setting a high price to attract customers who value exclusivity or quality. Psychological pricing involves setting prices that create a certain perception in the customer's mind, such as setting a price that ends in an odd number to make it seem lower. Choosing the right pricing approach can significantly impact a business's profitability and competitiveness. It is essential to consider the product's unique features, the target market, and the business's long-term goals when deciding on the pricing approach. While some businesses may opt for a premium pricing strategy, others may choose a price leadership strategy to gain a competitive advantage. Overall, businesses must regularly evaluate their pricing approach and make necessary adjustments to remain competitive in the market. This can involve conducting market research, analyzing customer feedback, and monitoring market trends to make informed pricing decisions. A well-thought-out pricing approach can help businesses improve their bottom line and maintain long-term sustainability.

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