- A.Setting price by adding a standard markup to product cost — simple but ignores customer willingness to pay and competitor prices. ✓
- B.Offering a free tier with limited features to drive adoption, then converting users to paid tiers with premium features.
- C.Launching at a high price to capture maximum margin from price-insensitive early adopters, then lowering price to expand to broader segments.
- D.Setting price by adding a standard markup to product cost — simple but ignores customer willingness to pay and competitor prices.
Cost-Plus Pricing is setting price by adding a standard markup to product cost — simple but ignores customer willingness to pay and competitor prices. The other options describe related but distinct concepts in Pricing — see the deep-dive guide for the full distinction.
How to think about questions like this
Simple, defensible, common — but often leaves money on the table. Questions like this test whether you can distinguish Cost-Plus Pricing from neighboring concepts. The most common trap is choosing a closely-related concept that sounds similar but applies in a different context.
When you see a definition question on an exam, do two things: (1) translate the question into your own words, then (2) generate the answer in your own words before reading the options. This avoids the cognitive bias of recognizing a familiar phrase as correct just because it is familiar.