Home › BBA Marketing › Marketing › Creating Products and Pricing Strategies › Why can setting too low a price actually hurt th…
Why can setting too low a price actually hurt the sales of a service?
AA higher price is often equated with higher value
BService costs rise as the price charged is lowered
CTax rules forbid pricing a service below its cost
DA low price raises the wages paid to the provider
Answer & Solution
Correct answer: A. A higher price is often equated with higher value
1. Buyers cannot inspect a service before it is delivered, so they look for other quality signals.
2. In services a higher price is often equated with higher value.
3. A price that is too low therefore reads as low value and can hurt sales.
4. The same image factor explains why a high price is expected for specialty products.
5. Cutting a price does not raise the cost of providing a service.
6. No tax rule bans low service pricing, and the price charged does not set the wage of the provider.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 11 "Creating Products and Pricing Strategies to Meet Customers' Needs", section 11.3 Developing a Marketing Mix_
Related questions
Big data and analytics are used to provide consumers with which two things?Big data refers to which of the following?Database marketing is sometimes given which other name?What does the information in a marketing database help managers do?One-to-one marketing means creating what?What are shopbots?How does online technology help sellers rather than buyers?What effect has the internet had on pricing power?