Describe the pricing impacts of the going-rate and creaming pricing approaches

Question

What will be an ideal response?

Answer 1

Going-rate pricing: Most organizations who use going-rate pricing either are commodity based (such as gasoline
stations) or sell to business markets (such as industrial supplies). As such, prices generally follow unit cost, with
some exceptions. Exceptions could include a sudden spike in prices due to perceived future cost increases (such as
the impact of rising gasoline prices on shipping costs) or a long-term reaction to changing economic conditions
(like general reductions in industrial supply prices during recessionary periods).
Creaming or skimming pricing: In a completely opposite approach from penetration pricing, creaming or skimming
pricing employs very high pricing in the introduction phase. It can be effective for companies with an effective
monopoly, where consumers perceive no substitutes. Once competitors offer similar products/services during the
growth and maturity phases, the company must reduce its prices or risk losing market share.