Pure Products is introducing a new paper coffee filter at a dramatically reduced cost. Pure Products expects that competitors will come out with similar products within a short period of time. Which pricing strategy will enable Pure Products to discourage competitors?
A) skimming pricing
B) penetration pricing
C) psychological pricing
D) cost-based pricing

Question

Quizplus · Accepted Answer

Penetration pricing involves setting a low price for a new product to quickly attract customers and gain a foothold in the market. This strategy is effective in discouraging competitors because it makes it difficult for them to match the low price, especially if Pure Products has achieved economies of scale and cost advantages. Competitors may be hesitant to enter the market and compete on price if they anticipate low profit margins. Furthermore, if Pure Products can establish a customer base and generate brand loyalty through this pricing strategy, customers may be less willing to switch to a competitor's product even if it is similarly priced.

Pure Products Is Introducing a New Paper Coffee Filter at a Dramatically