ACCA Performance Management (F5) Certification Practice Exam

What is the purpose of product-line pricing strategy?

1. To sell all products at a single price point

2. To differentiate prices among various products in a line

3. To set prices based solely on material costs

4. To establish low prices for every product

The correct answer is: To differentiate prices among various products in a line

The purpose of a product-line pricing strategy is to differentiate prices among various products within the same line. This approach allows a company to set different price points based on factors such as product features, quality, or consumer demand. By using this strategy, businesses can target distinct market segments and showcase a range of products that cater to varying customer preferences and budgets. For instance, a company may offer a budget version, a mid-range version, and a premium version of a product. Each of these products would have different prices that reflect their features and value propositions. This not only helps in maximizing revenue from each segment but also aids consumers in making choices that fit their needs. By effectively communicating the differences in quality and benefits of each option, a company can enhance perceived value and encourage customers to trade up to higher-priced items. In contrast, choices like a single price point or focusing on material costs do not capture the essence of product-line pricing, which thrives on the diversity and differentiation of products. Setting uniformly low prices across all offerings does not leverage the unique strengths of each product to appeal to a broader market, which is foundational to product-line pricing strategy.