In 2003 Frito-Lay introduced its Stax brand of potato chips. These chips were meant to compete directly against Pringles. The intent was to gain market share quickly. During the first few months they were on the market, Stax retailed for 69 cents. What type of pricing strategy is Frito-Lay likely using?
A) Price-skimming
B) Captive pricing
C) Periodic discounting
D) Penetration pricing
E) Bait pricing

Question

Quizplus · Accepted Answer

Penetration pricing is a pricing strategy where a company introduces a new product at a low price to quickly gain market share. This is exactly what Frito-Lay did with their Stax chips when they were first introduced in 2003 and retailing at 69 cents. The goal of this strategy is to attract customers away from competitors by offering a lower price on a similar product. By doing so, Frito-Lay hoped to build a customer base quickly and establish themselves as a strong competitor in the potato chip market.

In 2003 Frito-Lay Introduced Its Stax Brand of Potato Chips