When does a penetration pricing strategy tend to be most effective?
A)when demand is relatively inelastic
B)in price-sensitive markets
C)when the company can perform only small production runs
D)if unit costs are high

Question

Quizplus · Accepted Answer

Penetration pricing is most effective in price-sensitive markets where consumers are more likely to switch to a lower-priced product. In such markets, a low price can help a company capture a large market share quickly. This strategy may also encourage early adopters to try the product and spread word of mouth, generating momentum for future sales. However, in markets where demand is relatively inelastic, this strategy may not be as effective as consumers may not respond strongly to a lower price. Additionally, if unit costs are high, a company may not be able to sustain a low price for a long time, which can make this strategy less effective.

When Does a Penetration Pricing Strategy Tend to Be Most