ENTREPRENEURIAL MARKETING
MARKETING MIX
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Sellers earn a fair return on their investment.
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By tying the price to cost, sellers simplify pricing.
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When all firms in the industry use this pricing method, prices tend to be similar.
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This method ignores demand.
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With a standard markup, consumers know when they are being overcharged.
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Detailed explanation-1: -Which of the following presents the strongest reason that markup pricing generally does NOT make sense? Sellers earn a fair return on their investment. By tying the price to cost, sellers simplify pricing. When all firms in the industry use this pricing method, prices tend to be similar.
Detailed explanation-2: -Thus, a uniform markup pricing strategy can be disadvantageous in such cases. The business can lose an opportunity to charge a much higher price for such products and make higher profits. This could be vice-versa, too, wherein the similar margin may not be sustainable for some of the products and services.
Detailed explanation-3: -For example, if a product costs $10 and the selling price is $15, the markup percentage would be ($15 – $10) / $10 = 0.50 x 100 = 50%.