PCM Pricing Strategy & Management Flashcards

What pricing strategy involves setting a high initial price and gradually lowering it as competition increases?

Answer: Price skimming

Price skimming targets early adopters willing to pay a premium before reducing the price to attract more price-sensitive customers.

A company launches a new product at a very low price to quickly gain market share. This is called:

Answer: Penetration pricing

Penetration pricing uses a low introductory price to build market share rapidly, often raising prices once customer loyalty is established.

Price elasticity of demand measures:

Answer: How sensitive customer demand is to price changes

Price elasticity of demand quantifies the percentage change in quantity demanded relative to a percentage change in price.

Which pricing approach sets price primarily based on the perceived value a product delivers to customers?

Answer: Value-based pricing

Value-based pricing anchors price to what customers believe the product is worth rather than to internal costs or competitor benchmarks.

A 'loss leader' pricing strategy involves:

Answer: Selling a product below cost to draw customers who then buy profitable items

A loss leader sacrifices margin on one item to generate store traffic and increase overall basket size with higher-margin purchases.

MSRP stands for:

Answer: Manufacturer's Suggested Retail Price

MSRP is the price a manufacturer recommends retailers charge consumers, serving as a common reference point across distribution channels.