Question

Under which pricing strategy low initial prices are fixed?

Hint:

Penetration pricing emphasizes high sales volume and market share by initially keeping prices low.

Answer 1

Low initial prices are fixed under the Penetration Pricing Strategy.
Penetration pricing is a pricing strategy in which a firm sets a relatively low price for a new product at the time of its introduction into the market. The primary objective of this strategy is to penetrate the market quickly by attracting a large number of customers. Since the price is kept low, the product becomes affordable to a wider segment of consumers, leading to higher sales volume.
This strategy is especially useful in markets where consumers are price-sensitive and where strong competition exists or is expected to arise in the future. By fixing low initial prices, the firm discourages potential competitors from entering the market because the low profit margins make the market less attractive to them.
Once the product gains wide acceptance, establishes brand loyalty, and captures a significant market share, the firm may gradually increase the price. Thus, penetration pricing focuses on long-term gains rather than short-term profits.