A penetration pricing policy is MOST LIKELY to be effective when: (1)many segments of the market are price sensitive; (2)a low initial price discourages competitors from entering the market;and (3)_________.
A)unit production and marketing costs fall dramatically as production volumes increase
B)enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable
C)lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost
D)the high initial price will not attract competitors
E)customers interpret the high price as signifying high quality

Question

Quizplus · Accepted Answer

A penetration pricing strategy is effective when unit production and marketing costs fall dramatically as production volumes increase. This allows the company to set a low initial price, which can attract price-sensitive customers and discourage competitors from entering the market. As production volumes increase, the per-unit cost decreases, allowing the company to maintain profitability while keeping the price low.

A Penetration Pricing Policy Is MOST LIKELY to Be Effective