CIPS L3M3 Exam - Topic 1 Question 7 Discussion

Actual exam question for CIPS's L3M3 exam

Question #: 7
Topic #: 1

[All L3M3 Questions]

What is the term for a situation where a seller sets a high introductory price for a new product, to attract buyers who have a strong desire to get the product early, and who can afford it? The price then gets gradually reduced over time.

APrice discrimination

BMarket skimming

CPromotional pricing

DContribution pricing

Show Suggested Answer

Suggested Answer: B

'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.

by Staci at Apr 10, 2024, 12:34 PM

Limited Time Offer

25%

Off

Get Premium L3M3 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Glen

3 months ago

I've seen it work well with new tech products!

upvoted 0 times

...

Cammy

3 months ago

Wait, is that really the term? Sounds weird.

upvoted 0 times

...

Meaghan

3 months ago

Totally agree, market skimming makes sense!

upvoted 0 times

...

Cyril

4 months ago

I thought it was price discrimination.

upvoted 0 times

...

Lyla

4 months ago

It's definitely called market skimming!

upvoted 0 times

...

Daisy

4 months ago

I’m confused because contribution pricing sounds similar, but I don’t think it fits this scenario. I really hope I remember this correctly!

upvoted 0 times

...

Jamal

4 months ago

I feel like promotional pricing is more about discounts rather than starting high and lowering over time. So, I’m leaning towards market skimming.

upvoted 0 times

...

Thersa

4 months ago

I remember practicing a question like this, and I think it was about setting high prices initially to attract early adopters. Could it be price discrimination?

upvoted 0 times

...

Horace

5 months ago

I think the term might be market skimming, but I'm not entirely sure. It sounds familiar from our pricing strategy discussions.

upvoted 0 times

...

Cassi

5 months ago

I'm a little confused by the wording of this question. The details about the high introductory price and gradual reductions make me think it could be related to price discrimination as well. I'll have to carefully consider all the options before selecting my answer.

upvoted 0 times

...

Rickie

5 months ago

Okay, I've got this. The question is describing market skimming, where a company sets a high initial price to target early adopters, then gradually lowers the price over time to reach a wider market. Option B is the correct answer.

upvoted 0 times

...

Francisca

5 months ago

Hmm, I'm a bit unsure about this one. The question mentions a high introductory price and gradual price reductions, but I'm not totally confident that's the definition of market skimming. I may need to review my notes to be sure.

upvoted 0 times

...

Annamaria

5 months ago

This seems like a straightforward pricing strategy question. I think the key is to identify the specific technique being described, which sounds like market skimming.

upvoted 0 times

...

Alpha

5 months ago

Whew, this is a lot to consider. I'll need to review the options and make sure I understand the differences between them before deciding.

upvoted 0 times

...

Stephaine

5 months ago

This question seems straightforward, but I want to make sure I understand the key details about deployment servers in a non-cluster environment.

upvoted 0 times

...

Justine

5 months ago

Okay, I've got this. Coupling refers to the degree of interdependence between building blocks. So the correct answers are A and D, since those describe situations where one building block relies on or uses elements of another.

upvoted 0 times

...

Ezekiel

2 years ago

That's a good point, Reuben. Promotional pricing could also apply in this scenario.

upvoted 0 times

...

Reuben

2 years ago

I believe it could also be Promotional pricing, to attract early adopters.

upvoted 0 times

...

Coral

2 years ago

I agree with Ezekiel, Market skimming makes sense for new products.

upvoted 0 times

...

Ezekiel

2 years ago

I think the term is Market skimming.

upvoted 0 times

...

Thomasena

2 years ago

I believe the answer is B) Market skimming because it aligns with the strategy mentioned in the question.

upvoted 0 times

...

Beckie

2 years ago

Price discrimination doesn't really fit the description though.

upvoted 0 times

...

Mi

2 years ago

I'm not sure, but I think it could also be A) Price discrimination.

upvoted 0 times

...

Celeste

2 years ago

I agree with you, Market skimming makes sense in this context.

upvoted 0 times

...

Beckie

2 years ago

I think the answer might be B) Market skimming.

upvoted 0 times

...

Timmy

2 years ago

Haha, yeah, we've all been there! I remember when I was the first one in my friend group to get the new gaming console. I felt like such a baller, but then I realized I could have saved a bunch of money if I'd just waited a bit.

upvoted 0 times

...

Christiane

2 years ago

You know, this question reminds me of that time I bought the latest gadget on launch day. I paid, like, double the price that it was going for a few months later. Guess I was one of those 'early adopters' they were targeting with the high price!

upvoted 0 times

Lemuel

2 years ago

I did the same thing with a phone once.

upvoted 0 times

...

Samira

2 years ago

B) Market skimming

upvoted 0 times

...

Brendan

2 years ago

I was thinking 'price discrimination', but I guess that's a bit different. Price discrimination is more about charging different prices to different customers based on their willingness to pay, rather than changing the price over time.

upvoted 0 times

...

Shonda

2 years ago

Yeah, that makes sense to me. I think 'market skimming' is the right answer here. It's a way for the seller to maximize their profits by segmenting the market and charging different prices to different customers.

upvoted 0 times

...

Noah

2 years ago

Hmm, I'm pretty sure it's called 'market skimming'. The idea is to target the customers who are willing to pay a premium to get the product early, and then gradually lower the price to reach a wider market, right?

upvoted 0 times

...

Josephine

2 years ago

Ah, this is a tricky one! I've definitely seen this pricing strategy used before, but I can't quite put my finger on the term for it. Anyone have any thoughts?

upvoted 0 times

...