Which of the following statements about penetration pricing is most accurate?
A)Penetration pricing is a profit-oriented approach to pricing.
B)Penetration pricing is a cost-oriented pricing method.
C)Penetration pricing encourages competitors to enter a market.
D)A penetration pricing strategy is more effective in a marketplace with price-sensitive consumers.
E)Because penetration pricing is a high initial-price strategy, it will not attract competitors.

Question

Quizplus · Accepted Answer

Penetration pricing is a pricing strategy where a low price is initially set to attract price-sensitive customers and gain market share. This approach is most effective in a marketplace with price-sensitive consumers, as they are more likely to be swayed by a lower price. However, while it may attract customers, it can also attract competitors who may lower their prices to match or undercut the penetration price. Therefore, it may not necessarily encourage competitors to enter a market, as stated in option C. Option A is incorrect because penetration pricing is not primarily profit-oriented, but rather, it is focused on gaining market share. Option B is untrue since penetration pricing is not based solely on cost but rather is a more market-oriented pricing method. Lastly, option E is also incorrect because penetration pricing is a low initial-price strategy, not a high initial-price strategy.

Which of the Following Statements About Penetration Pricing Is Most