D ascoe Practice LO 1 G Exeter Industries produc e Chegg

D ascoe Practice . LO 1 \\ G Exeter Industries produc \\ e Chegg Study! Guided S: x × x C ezta.mheducation.com/hm.t px connect BUS 385: COST MANAGEMENT: Section.01- MWF @1:00 Megan Bowman ACCOUNTING BSJC.02: Practice LO 1 instructions I help

Solution

Premium pricing can be used in the following economic circumstances.

> When there are barriers to entry. With barriers to entry, one cannot pay a volume game. In order to recover the costs, prices would be higher and premium pricing would work in such economies

> In these economies, customers are ready to pay higher price for a good product.

> There are no substitutes available

Premium pricing can also be used for price skimming. In this strategy, initially products are launced at premium prices. Customers willing to pay the price will purchase the product. Through this, companies try to recover most of the costs. Then later on with a slight price reduction, product is made affordable to more people. There could be multiple price reduction depending on the company\'s strategy.