Colorful Concoctions, a maker of children's crayons, decided to price its boxes of crayons below the long-term market price. The firm agreed to reduce its profit margin from 30 percent to 5 percent in the short-term in order to increase market share and discourage other firms from entering the crayon market. Colorful Concoctions was implementing a
A) variable pricing strategy.
B) skimming price strategy.
C) penetration pricing strategy.
D) price lining strategy.

Question

Quizplus · Accepted Answer

Colorful Concoctions is using a penetration pricing strategy, which involves setting a low price to enter a market and gain market share. By reducing its profit margin, the company is able to lower the price of its crayons and attract price-sensitive customers. This strategy helps the company establish its brand and create a customer base, which can discourage other firms from entering the market.

Colorful Concoctions, a Maker of Children's Crayons, Decided to Price