A "penetration pricing policy":
A) is the same as a "meeting competition" price-level policy.
B) is wise when demand is fairly inelastic-offering an "elite" market.
C) involves temporary price cuts to speed new products into market.
D) involves a series of step-by-step price reductions along an inelastic demand curve.
E) may be wise if a firm expects strong competition very soon after its product introduction.

Question

Quizplus · Accepted Answer

A penetration pricing policy is often used when a firm expects to face strong competition shortly after introducing a new product. By setting a low price initially, the firm aims to quickly attract a large number of customers and gain market share before competitors enter the market. This strategy is not about temporary price cuts (which would be more akin to promotional pricing) or specifically about moving along an inelastic demand curve. It's about setting a low price from the start to penetrate the market deeply and quickly.

A "Penetration Pricing Policy