Question

In this method of pricing, goods are sold at higher prices so that fewer sales are needed to break even. It also helps the company in recovering the research and development costs which are associated with the development of a new product. This method of pricing is:

• A. Penetrating pricing
• B. Cost-plus pricing
• C. Variable pricing
• D. Creaming pricing

Answer 1

The Correct Option is D

The method described involves setting a high initial price for a new or innovative product. This approach is called Creaming pricing or Price Skimming. It targets consumers who are willing to pay more to be early adopters. It helps in:
Recovering high research and development costs.
Generating profits quickly with fewer sales.
Establishing a premium image for the product. Other Options:
Penetrating pricing: Involves setting a low initial price to gain market share quickly.
Cost-plus pricing: Adds a fixed percentage to the cost of production.
Variable pricing: Charges different prices to different customers based on demand or negotiation. Thus, the correct answer is (D) Creaming pricing.