ExpertEasy2 marksMultiple Choice
ACCA · Question 8 · Decision-making techniques
Section A
A software startup has developed a revolutionary AI-driven video editing tool. There are currently no direct competitors. The company needs to recover its high initial development costs quickly before competitors enter the market in 12-18 months.
Which pricing strategy is MOST appropriate for this product?
Section A
A software startup has developed a revolutionary AI-driven video editing tool. There are currently no direct competitors. The company needs to recover its high initial development costs quickly before competitors enter the market in 12-18 months.
Which pricing strategy is MOST appropriate for this product?
Answer options:
A.
Market penetration
B.
Market skimming
C.
Target pricing
D.
Marginal cost pricing
How to approach this question
Match the scenario (high R&D, short monopoly period) to the strategy that maximizes early cash flows.
Full Answer
B.Market skimming✓ Correct
Market skimming involves setting a high initial price for a new, innovative product. This strategy is ideal when there is a short-term monopoly and high initial R&D costs to recover. Early adopters are willing to pay a premium, allowing the company to maximize short-term revenues before competitors enter and force prices down.
Common mistakes
Confusing skimming with penetration. Penetration is used to gain mass market share quickly with low prices.
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