27 Lecture - Price Changes

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27 Lecture

MGT301

Midterm & Final Term Short Notes

Price Changes

Price changes refer to alterations made in the prices of products or services offered by a business. Price changes are often driven by various internal and external factors such as changes in supply and demand, competitor pricing, changes in pro


Important Mcq's
Midterm & Finalterm Prepration
Past papers included

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  1. Which of the following is NOT a reason for price changes? A) Changes in raw material costs B) Changes in demand C) Changes in competitive pressures D) Changes in advertising campaigns Answer: D) Changes in advertising campaigns

  2. When a firm temporarily prices its products below the list price or even below cost, it is using which type of pricing strategy? A) Skimming pricing B) Penetration pricing C) Loss-leader pricing D) Psychological pricing Answer: C) Loss-leader pricing

  3. The practice of setting a low initial price on a new product to appeal to the mass market is known as: A) Skimming pricing B) Penetration pricing C) Discount pricing D) Psychological pricing Answer: B) Penetration pricing

  4. A company wants to decrease the price of its product to remain competitive. Which of the following pricing strategies should the company use? A) Skimming pricing B) Penetration pricing C) Discount pricing D) Psychological pricing Answer: C) Discount pricing

  5. When a company gradually reduces the price of a product over time in order to extend its life in the market, it is using which pricing strategy? A) Skimming pricing B) Penetration pricing C) Price skimming D) Price lining Answer: C) Price skimming

  6. When a company sets different prices for different versions or features of the same product, it is using which pricing strategy? A) Skimming pricing B) Penetration pricing C) Price skimming D) Price discrimination Answer: D) Price discrimination

  7. When a company increases the price of its product to signal higher quality or exclusivity, it is using which pricing strategy? A) Skimming pricing B) Penetration pricing C) Prestige pricing D) Promotional pricing Answer: C) Prestige pricing

  8. The practice of setting prices that end in odd numbers, such as $9.99 instead of $10.00, is an example of which pricing strategy? A) Skimming pricing B) Penetration pricing C) Odd pricing D) Price lining Answer: C) Odd pricing

  9. Which of the following is a disadvantage of cost-plus pricing? A) It is easy to calculate and understand B) It guarantees a certain level of profitability C) It may not reflect actual market conditions D) It allows for quick adjustments to changing market conditions Answer: C) It may not reflect actual market conditions

  10. A company wants to increase the price of its product without alienating customers. Which of the following pricing strategies should the company use? A) Skimming pricing B) Penetration pricing C) Price lining D) Price bundling Answer: D) Price bundling



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is price skimming strategy? Answer: Price skimming strategy is a pricing approach in which a company sets a high initial price for its new product or service, and gradually lowers the price over time as competition increases.

  2. What is price elasticity of demand? Answer: Price elasticity of demand is the measure of the sensitivity of consumers towards the changes in the price of a product or service.

  3. What is dynamic pricing? Answer: Dynamic pricing is the pricing approach that adjusts prices of products or services in real-time based on various factors such as demand, supply, competition, and other market conditions.

  4. What is penetration pricing? Answer: Penetration pricing is the pricing approach in which a company sets a low initial price for its new product or service to attract customers and gain market share.

  5. What is predatory pricing? Answer: Predatory pricing is the pricing approach in which a company sets the price below its production cost to eliminate competition and gain a monopoly in the market.

  6. What is cost-plus pricing? Answer: Cost-plus pricing is the pricing approach in which a company sets the price by adding a markup on top of its production costs.

  7. What is value-based pricing? Answer: Value-based pricing is the pricing approach that considers the perceived value of the product or service by the customers and sets the price accordingly.

  8. What is price discrimination? Answer: Price discrimination is the pricing approach in which a company sets different prices for the same product or service based on the customer's willingness to pay.

  9. What is price bundling? Answer: Price bundling is the pricing approach in which a company offers two or more products or services at a discounted price when sold together as a package.

  10. What is the gray market? Answer: The gray market refers to the sale of branded products through unauthorized channels, such as parallel imports or unauthorized resellers, often at a lower price than the authorized channels.

Price changes refer to any modifications made to the pricing structure of a product or service. It is a critical element of the marketing mix and has a direct impact on the bottom line. Price changes can be made for various reasons, such as responding to changes in the market environment, introducing new products or services, or to gain a competitive edge. Companies use different price strategies and tactics to adjust prices, such as discounts, rebates, allowances, and promotional pricing. When companies plan to implement a price change, they need to consider several factors such as cost, demand, competition, and legal considerations. Companies should also communicate the change effectively to their target audience, which can include customers, suppliers, and other stakeholders. Price changes should be implemented strategically to avoid damaging the company's brand image or customer loyalty. It is crucial to assess the potential impact of price changes on the company's reputation and its customers' perception. Companies should also monitor the market's response to the changes and make necessary adjustments as needed. In conclusion, price changes are an essential aspect of the marketing mix and should be implemented thoughtfully to ensure their success. Companies should consider several factors before implementing price changes, such as cost, demand, competition, and legal considerations. Effective communication and monitoring the market's response are also essential to avoid damaging the company's brand image or customer loyalty.

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