Which one of the following will be the appropriate pricing strategy for a new product expecting an expanding market?
Penetrating pricing
The question concerns the launch price for a brand-new product entering a market that is expected to expand, and asks which strategy fits that situation best.
Penetration pricing sets a deliberately low introductory price so that the firm can attract a large number of buyers quickly, build a big market share while the market is still growing, gain economies of large-scale production, and discourage rival firms from entering because margins look thin. This matches an expanding market perfectly.
Skimming pricing does the opposite: it sets a high initial price to earn the maximum margin from the few early adopters who will pay it, and then lowers the price in stages. This suits a limited or price-inelastic market, not one expected to expand.
Monopoly pricing depends on the firm having real market power, and differential pricing simply charges different prices to different buyers or segments; neither is defined by the new-product, expanding-market situation described.
Hence the appropriate strategy is penetrating pricing.
Similar Questions
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
The practice of selling below cost, with an intention to destroying the competitor is referred to as :
Cost - Plus pricing is not suitable for :
Match the items of List - I with that of List - II and suggest the correct code :
List - I (Pricing Strategies) List - II (Explanations) (a) Customary pricing (i) Ending a price with 99 paise (b) Skimming (ii) pricing a product based on perceived expectations of customers (c) Penetration pricing (iii) Setting a high price which gradually reduces as competitors enter the market (d) Psychological pricing (iv) Offering at a low price for a new product during its initial offering Code :
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
The practice of selling below cost, with an intention to destroying the competitor is referred to as:
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy?
When the Companies pay less attention to its own costs or demands and bases its price largely on competitors’ prices, then it is known as :
Match the items of the List-I with those of the List-II and suggest the correct code from the following:
List-I List-II i. Loss Leader a. Locational price differentials ii. Unchanged Pricing b. Products with high initial demands iii. Basing Point Pricing c. Product line pricing iv. Skimming Pricing d. Oligopoly pricing Codes:
Important Questions from Pricing decisions
Pricing practice of setting a price target and then developing a product that would allow the firm to maximise total profit at that price is called:
- Which of the following are the informal pricing methods ?
I. Cost plus
II. Competitive
III. Rate of return
IV. Trial and error
Codes : Which among the following is not an internal factor in pricing decisions?
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
