Which one of the following is a TRUE statement of high/low pricing?

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BlackTom AI · Accepted Answer

Question restatement: Which one of the following is a TRUE statement of high/low pricing?

Option 1: 'Similar to the everyday-low-pricing strategy, high/low pricing strategy helps to attract two customer segments: those who are price sensitive and those who are not.' This statement is mixing up concepts. High/low pricing typically relies on periodic promotions to create a sense of deals, not the same stable attractor as everyday-low-pricing (EDLP). While high/low pricing can appeal to some price-sensitive shoppers during sale periods, the dichotomy of two distinct segments is more characteristic of EDLP versus promotional pricing, making this claim partially inaccurate in how it describes the customer segmentation dynamics.

Option 2: 'Setting a relatively high reference price plays an important role for firms that adopt the high/low pricing strategy.' This assertion aligns with the core idea of high/low pricing: establishing a high reference or regular price to frame the perceived value, then occasionally offering discounts to spur demand. The reference price helps create an illusion of savings and drives traffic for promotional events, which is a fundamental element of high/low pricing.

Option 3: 'A large post promo dip tends to suggest that the high/low pricing strategy is effective.' A post-promo dip refers to a drop in sales after a promotion ends. In high/low pricing, you might actually expect demand to spike during promotions and revert to higher levels afterward; a large post-promo dip is typically viewed as a potential signal of promotional cannibalization or ineffective pricing, not a clear indicator of effectiveness. Therefore this statement is misleading about what post-promo behavior implies for high/low pricing effectiveness.

Option 4: 'Firms that adopt high/low pricing strategy first set high price, and then lower the prices as time passes.' This describes a broad sequencing idea, but the hallmark of high/low pricing is periodic promotions around a relatively high reference price rather than a simple gradual downward trail of prices over time. The typical pattern emphasizes deliberate price promotions to create demand spikes, not a steady price decline over time, making this description incomplete or inaccurate as a universal rule.

Overall assessment: Each option presents a distinct interpretation of high/low pricing. The second option accurately captures a central, strategic element—using a relatively high reference price to anchor the pricing structure and enable meaningful promotions. The other options either mischaracterize customer segmentation, misinterpret post-promo implications, or misstate the typical price progression over time, which weakens their claim of being true statements about high/low pricing.

Which one of the following is a TRUE statement of high/low pricing?Single choice

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