Question

Procter Gamble (P G) managers know that workers are often paid a daily wage and that its Mexican customers generally carry 5- and 10-peso coins. To keep prices of shampoo and detergent below 11 or 12 pesos and ensure satisfactory profit margins, Procter Gamble is using which method of pricing?

Answer 1

Procter & Gamble (P&G) uses psychological pricing to ensure their products are attractively priced in line with common coin denominations, fitting customers' budgets and maximizing sales.

Step-by-step explanation:

Procter & Gamble (P&G) managers are using a psychological pricing strategy to adjust their product prices in such a way that they match the coin denominations predominantly carried by Mexican consumers, specifically the 5- and 10-peso coins. By setting the prices for shampoos and detergents below the next whole number, they aim to fit within the daily budget of the average worker, while still maintaining satisfactory profit margins. This form of pricing takes into account consumer perception of price points, in this case, making products appear more affordable and within reach, influencing consumer behavior in favor of P&G's products.