Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.

Premium pricing strategies used by suppliers are characterised by which of the following? Select TWO that apply.
A . Products are charged at a price based on supplier’s reputation
B . This strategy is often used when supplier attempts to enter new market
C . Price is based on cost structures
D . Typically found in the early part of the product life cycle
E . Premium price is determined by variable costs only

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Answer: A,D

Explanation:

There are several pricing strategies used by suppliers:

Cost-plus pricing C Total variable + Fixed cost + profit

Premium pricing C based on branding. Supplier determines to charge a very high price, notconnected with cost structures, usually based on its reputation and/or the perception that the product/service is of

a superior quality. This strategy typically found in the early part of the product life cycle/when demand exceeds supply.

Penetration pricing – Supplier attempts to enter a new market or extend its share in an established one. It is characterised by price reductions to increase volume, followed by steady price increases; may

even be loss leading at start (no profit made) Marginal cost pricing C covers only variable cost

Market pricing C suppliers prices in line with what the market is willing to pay