A penetration pricing policy is most likely to be effective when
A)lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost.
B)the high initial price will not attract competitors.
C)a low initial price discourages competitors from entering the market.
D)customers interpret the high price as signifying high quality.
E)enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable.

Question

Quizplus · Accepted Answer

The conditions favoring penetration pricing are the reverse of those supporting skimming pricing: (1)many segments of the market are price sensitive,(2)a low initial price discourages competitors from entering the market,and (3)unit production and marketing costs fall dramatically as production volumes increase.

A Penetration Pricing Policy Is Most Likely to Be Effective