Question

karen and anika consider charging customers a higher price than their competitors do to give the impression that their services are higher quality and intended for an exclusive, high-end crowd. this pricing tactic is known as

Answer 1

The pricing tactic being described is known as price as a signal of quality. By charging higher prices than their competitors, businesses aim to give the impression that their services are higher quality and intended for an exclusive, high-end crowd.

Step-by-step explanation:

The pricing tactic being described in this question is known as price as a signal of quality. When businesses charge higher prices than their competitors, it can give the impression that their services are of higher quality and intended for an exclusive, high-end crowd.

This strategy relies on the consumer's assumption that higher prices indicate higher quality. Examples of this can be seen in expensive restaurants, where people assume the food is good because it is expensive, or in the case of hiring a lawyer, where a higher-priced lawyer is assumed to be better.

By using this pricing tactic, businesses aim to differentiate their product or service and attract customers who associate a higher price with higher quality.

Answer 2

Karen and Anika are considering using a 'premium pricing' strategy to make their services appear higher in quality and exclusive. This tactic relies on the concept that higher prices can signal higher quality to buyers, especially when they lack perfect information.

Step-by-step explanation:

Karen and Anika are considering a pricing tactic known as premium pricing or price skimming. This approach involves setting a higher price point to create the perception that their services are of higher quality and cater to an exclusive, high-end market. The underlying concept is that price can serve as a signal of quality, especially when a buyer is confronted with imperfect information. Consumers may perceive that higher-priced goods or services are superior due to the association of cost with quality, such as with gemstones, lawyers' fees, or luxury goods. This strategy relies on product differentiation, which is any action a firm takes to make consumers believe their products are distinct from competitors. Certain famous bands also employ a form of premium pricing as their ticket demand may be inelastic, allowing them to charge very high prices.