PCM PCM Pricing Strategy & Management 2 — Questions and Answers
Question 1: Pricing a product at $9.99 instead of $10.00 is an example of:
- Dynamic pricing
- Psychological pricing (Correct answer)
- Competitive pricing
- Geographic pricing
Correct answer: Psychological pricing
Psychological pricing exploits cognitive biases—customers perceive $9.99 as significantly cheaper than $10 even though the difference is one cent.
Question 2: Cost-plus pricing is calculated by:
- Matching the lowest competitor price
- Adding a standard markup percentage to the unit cost of production (Correct answer)
- Estimating what customers will pay and working backward
- Dividing total fixed costs by expected unit sales
Correct answer: Adding a standard markup percentage to the unit cost of production
Cost-plus pricing ensures every unit sold covers its production cost plus a predetermined profit margin.
Question 3: Which pricing tactic bundles multiple products together at a combined price lower than buying each separately?
- Captive pricing
- Price bundling (Correct answer)
- Odd-even pricing
- Skimming
Correct answer: Price bundling
Price bundling increases perceived value and encourages customers to buy more items than they might have purchased individually.
Question 4: Ride-sharing apps that raise fares automatically during peak demand periods use:
- Prestige pricing
- Freemium pricing
- Dynamic pricing (Correct answer)
- Loss-leader pricing
Correct answer: Dynamic pricing
Dynamic pricing adjusts prices in real time based on supply, demand, time, or other market signals to maximize revenue.
Question 5: A 'price ceiling' in marketing refers to:
- The lowest price that still covers variable costs
- The maximum price customers are willing to pay before switching to alternatives (Correct answer)
- A government-mandated cap on retail prices
- The point at which revenue equals total costs
Correct answer: The maximum price customers are willing to pay before switching to alternatives
In a marketing context, the price ceiling is determined by customer value perception—exceeding it causes demand to collapse.
Question 6: A SaaS company offers core features free forever and charges only for advanced functionality. This model is called:
- Tiered pricing
- Penetration pricing
- Freemium pricing (Correct answer)
- Subscription pricing
Correct answer: Freemium pricing
Freemium pricing acquires a large free user base and converts a percentage to paying customers through premium feature upsells.
PCM PCM Pricing Strategy & Management 2
Pricing a product at $9.99 instead of $10.00 is an example of: