Setting a low price when launching a new product in order to get established in the market.

Setting a low price when launching a new product in order to get established in the market.

• A. Penetration pricing
• B. Pricing strategy
• C. Product life cycle
• D. Sponsorship

Answer: (A)

Penetration pricing is about launching a product with a deliberately low price to attract a large number of customers quickly and gain market share. By setting a low price, the business encourages high sales volumes, which can help establish the product in a competitive market and deter potential entrants. The strategy relies on achieving economies of scale and building brand awareness early, with the possibility of raising prices later once loyalty and share are established. This differs from a general pricing strategy, which is any plan for setting prices, a product life cycle concept, which models stages a product goes through, and sponsorship, which relates to funding promotional activity rather than how a product is priced.

Penetration pricing is about launching a product with a deliberately low price to attract a large number of customers quickly and gain market share. By setting a low price, the business encourages high sales volumes, which can help establish the product in a competitive market and deter potential entrants. The strategy relies on achieving economies of scale and building brand awareness early, with the possibility of raising prices later once loyalty and share are established. This differs from a general pricing strategy, which is any plan for setting prices, a product life cycle concept, which models stages a product goes through, and sponsorship, which relates to funding promotional activity rather than how a product is priced.