Electromac has launched the long awaited very powerful next generation games console called the Kenyo, which uses newly developed technology.
What is the most appropriate pricing strategy for the new Kenyo?
Select ONE answer:
- Predatory pricing
- Price skimming
- Cost-plus pricing
- Competitive pricing
Show the workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Business Studies KS4 & KS5 classes
The answer is 2
- Not correct – Electromac is introducing a new technology, not aiming to force rivals out by offering a price so low it will not recover costs such as research and development.
- Correct – Price skimming is a pricing strategy used by businesses to initially set a high price for a new product which will reduce over time. Hard-core games players will pay higher prices to have the next generation equipment as soon as it is available. This allows Electromac to maximise its revenues in the early stages of the new Kenyo launch and price skimming will allow Electromac to recoup R&D costs and still make profit.
- Not correct – using standard mark-up pricing will not take advantage of the introduction of new technologies and the long-awaited launch of a next generation Kenyo.
- Not correct – Electromac’s new technology means there are no immediate competitive substitutes so they don’t need to offer a competitive price yet.
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