A temporary pricing in which company sells products below the list price, and sometimes even below cost to increase shortrun sales :

Question

Accepted Answer

The correct option is 1:
Promotional pricing is the correct term for a temporary reduction in price, often below the regular list price, and sometimes even below the company’s cost, specifically to increase short-run sales and traffic. This strategy is a key component of a company's sales promotion efforts. The objective is not long-term profit on that specific item, but rather to lure customers into the store or website, drive demand for complementary products, clear out inventory, or generate excitement for a new offering. Examples include loss-leaders (selling an item below cost), special-event pricing, and low-interest financing offers. This aggressive short-term approach is designed to create a sense of urgency and immediate value for the consumer, making it a powerful tactic for boosting transactional volume over a limited period.

The incorrect option is 2:
The term Temporary pricing is too generic and not the precise, recognized concept in marketing and pricing strategy. While the pricing action described in the question is, by definition, temporary, 'Promotional pricing' is the specific, universally accepted name given to the strategy of using price cuts as a short-term marketing tool. Using a generic descriptor like 'Temporary pricing' would be inaccurate in a technical context like this multiple-choice question. Marketing terminology requires the use of the most specific term to describe a strategic action's intent, and the intent here is clearly promotional.

The incorrect option is 3:
FOB-origin pricing is a specific type of geographical pricing strategy and is unrelated to temporary, demand-stimulating price cuts. FOB stands for 'Free On Board' and means the buyer pays the freight from the factory, or 'origin,' to the final destination. The price quoted by the seller is the cost of the goods only, with the buyer incurring all transportation costs and risks once the goods are loaded. This term focuses on the distribution and logistics of who pays for shipping, not on using price to increase short-term sales volume. Therefore, it addresses shipping responsibility, not market demand promotion.

The incorrect option is 4:
Geographical pricing is a broad strategy that relates to setting prices for customers located in different geographical areas, which often involves varying prices to cover different shipping and logistical costs. This includes strategies like zone pricing, basing-point pricing, and FOB-origin pricing. It is a long-term pricing structure concerned with distance and freight, not a short-term, temporary tactic designed to boost sales by intentionally selling below the list price or cost, which is the defining characteristic of promotional pricing.