PCM Pricing Strategy & Management Flashcards

Pricing a product at $9.99 instead of $10.00 is an example of:

Answer: Psychological pricing

Psychological pricing exploits cognitive biases—customers perceive $9.99 as significantly cheaper than $10 even though the difference is one cent.

Cost-plus pricing is calculated by:

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.

Which pricing tactic bundles multiple products together at a combined price lower than buying each separately?

Answer: Price bundling

Price bundling increases perceived value and encourages customers to buy more items than they might have purchased individually.

Ride-sharing apps that raise fares automatically during peak demand periods use:

Answer: Dynamic pricing

Dynamic pricing adjusts prices in real time based on supply, demand, time, or other market signals to maximize revenue.

A 'price ceiling' in marketing refers to:

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.

A SaaS company offers core features free forever and charges only for advanced functionality. This model is called:

Answer: Freemium pricing

Freemium pricing acquires a large free user base and converts a percentage to paying customers through premium feature upsells.