Question

Mini-Case Gourmet Pets is an innovative competitor in the billion dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a "baby substitute." These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked.) Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food is virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product. Gourmet Pets feels its target market is more concerned with perceived quality than actual product cost. They also feel that the newness of this concept offers an opportunity to make high profits since they are the first firm to enter this market, so they face no direct competition. Their decision to charge a high price is consistent with the ________ strategy.

Answer 1

Answer:

Premium pricing strategy

Explanation:

The premium pricing strategy consists in charging an artificially high price for the product under the rationale that consumers will respond positively to the high price.

The assumption is that customers will believe that a high price means that the product is reliable and of high quality, and that they will buy the product in significant quantities because of this.

In this question, we have an example of premium pricing because the firm is charging a price that should be lower, for a product that is marketed as of being of higher quality than it is, under the assumption (after conducting a marketing study) that customers care more about the perceived quality of the product, than its real quality, and its price.