ITPEC FE Morning October 2021 Question 67
The sales prices of products are decided according to different sales price setting methods. Which of the following approaches sets a high sales price by using the consumer psychology that high quality equals to high price?
Explanation
Prestige pricing — a deliberately high price that uses the buyer's belief that expensive means good quality.
For luxury goods, cosmetics or brand products, a low price can make buyers doubt the quality, so the seller sets the price high to signal status and quality. This is a psychological pricing method: the price is set from how consumers perceive it, not from cost or competitors.
Answer (d)
Why not others:
- •(a) Cost plus pricing — adds a fixed margin to the manufacturing or purchasing cost; no consumer psychology involved
- •(b) Differential pricing — charges different prices for the same product by customer group, time or place (student discounts, peak and off-peak fares)
- •(c) Market price following pricing — sets the price in line with competitors or the going market rate
Key rule: Classify a pricing method by what drives the price: cost (cost plus), competitors (market following), customer segment (differential) or buyer perception (prestige, odd pricing).
Business Strategy Management · AI-written, may contain errors
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