Singapore Shoe Trends, a producer of formal footwear for both men and women, proposes to reimburse customers with $10 upon exchanging an old pair of shoes for a new one. Essentially, this reduces the price of the new shoes by $10. What is this pricing adjustment called?

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Question restatement: Singapore Shoe Trends offers to reimburse customers $10 when they exchange an old pair of shoes for a new pair, effectively reducing the price of the new shoes by $10. What is this pricing adjustment called?

Option 1: Trade-in allowance. This choice identifies a common practice where a seller provides a deduction or credit to the buyer for trading in an old product when purchasing a new one. It directly matches the scenario described, where the company reduces the net price of the new shoes by the value of the old pair.

Option 2: Seasonal discount. A seasonal discount is a price reduction offered during a particular season to stimulate demand. It is not tied to an exchange of old merchandise, so it does not fit the described trade-in mechanism.

Option 3: Functional discount. A functional discount (also called a trade discount) is typically granted to business buyers for performing certain functions or roles, such as wholesalers or retailers. It does not involve a customer returning an old product for credit toward a new purchase.

Option 4: By-product pricing. This involves setting a price for the primary product that reflects the value of by-products generated along the production process. It is not relevant to consumer trade-in arrangements or customer exchanges.

Option 5: Captive product pricing. This strategy prices a core product and its complementary or captive products (often accessories or consumables) to maximize profits from the overall package. It does not describe giving a direct price credit for a traded-in item.

In examining the core idea behind each option, the scenario centers on a credit given to the buyer for an exchanged item, which aligns precisely with the concept of a trade-in allowance. The other options describe pricing tactics that are oriented to time-based discounts, business-to-business discounts, product-by-product value management, or bundled pricing of core and ancillary goods, none of which capture the specific exchange credit described. Therefore, the reasoning supports identifying the described adjustment as a trade-in allowance rather than the other listed pricing mechanisms.

MKTG1199 LF04 - In-Class Test 2

Singapore Shoe Trends, a producer of formal footwear for both men and women, proposes to reimburse customers with $10 upon exchanging an old pair of shoes for a new one. Essentially, this reduces the price of the new shoes by $10. What is this pricing adjustment called?

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