Question

Penetration pricing is A. setting prices a few dollars or cents above an even number to indicate quality. B. charging different prices to different buyers for goods of like grade and quality. C. setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. D. setting a low initial price on a new product to appeal immediately to the mass market. E. setting a below-market price for the product or product class oriented on a subjective feel for competitors’ prices or market price as the benchmark.

Answer 1

Answer:

D. setting a low initial price on a new product to appeal immediately to the mass market.

Explanation:

Penetration pricing is a market entry strategy where a business sets a low initial price for a new product.  The objective of establishing a low price is to entice the masses to buy the new product, thus penetrating the market.  Penetration pricing is useful in creating market share for the new product. It also helps generate good sales volumes for the product.

The strategy is best used when the demand for a product is expected to be high. The initial low price attracts many customers and also discourages competitors from entering the market immediately. The strategy has its risks too; the high demand it creates may diminish should the company attempt to increase the price of the new product.