ICAEW BIP · Chapter 4 · Question 7 of 11
A company launches a new product at a deliberately low price to win market share quickly and discourage competitors from entering. What is this pricing strategy called?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Penetration pricing
Explanation
Penetration pricing sets a low initial price to gain a large share of the market quickly, achieve economies of scale and create a barrier to entry. Market skimming is the opposite: a high launch price aimed at customers willing to pay a premium, which is later reduced.
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