CIPS Exam L3M3 Topic 1 Question 12 Discussion

'Market skimming' is the correct answer.

An obvious example of this type of pricing behaviour is in the field of technology, where 'early adopters' will pay significantly more for a product, even although they know the price will drop subsequently. For commercially-used products, sometimes there is an urgent need for an organisa-tion to acquire - a topical example as I write (early 2022) is some new surveillance technology which is in the news and which some governments are desperate to have. In consumer markets, everyone's 'go-to' example is the next generation smartphone, especially Apple products.

Promotional pricing is a short-term price reduction (or 'two-4-one' type offer) to generate sales in the short-term, for example to clear stock, or because of a manufacturer financial support arrangement.

Price discrimination is where the seller sets different prices for different market segments. An ex-ample would be charging different rail fares in UK or mainland Europe based on customer age.

Contribution pricing is based on the notion that sales should cover costs, contributing to the busi-ness, without necessarily making a profit. For example, a large order may be accepted which will keep the workforce employed (retaining their skills as well as having a considerate / ethical outlook) to see the firm through a rough period.