After Years of Using Full-Cost Pricing in a Niche Market

question 175

Multiple Choice

After years of using full-cost pricing in a niche market for luxury watches,you find your competition has slowly increased its market share each year with discounted prices.Focus groups have confirmed that the image of your watches is still one of success and prestige,but more people are willing to consider substitutes.Incremental cost-pricing could enable you to increase profits and unsettle your competitor's complacency.You know that changing to incremental-cost pricing does have a significant downside problem.But you are also aware that you can prevent that from happening. ​
​What is the downside problem and which solution can you take to prevent its happening?

• A)​downside is running out of product. solution is to ramp up your production capacity to meet the demand of customers wanting lower prices
• B)​downside is lack of audience awareness. solution is to create high-energy ads to appeal to young customers
• C)​downside is the tax consequences. solution is to tell the CEO that a change in your pricing strategy could lead to an IRS audit
• D)​downside is that the whole market could change. solution is to accept the fact that the wholesale and retail prices of used watches could drop markedly
• E)​downside is losing your niche market. solution is to take solid measures to isolate your markets for lower-priced watches from your higher-priced models

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Definitions:

Nineteenth Century

The 1800s, marked by significant events including industrialization, colonialism, and numerous social and political changes worldwide.

African Methodist Episcopal Church

A historic African-American Methodist denomination founded in the early 19th century, emphasizing civil rights and social justice.

White Slave Traders

Refers to individuals or groups involved in the coerced trade of humans, typically for the purposes of forced labor or sexual exploitation, historically involving Europeans and Americans.

Africa

A continent south of Europe and between the Atlantic and Indian oceans, known for its diverse cultures, languages, and histories.