Question

Chocolate Concoctions , a maker of high end chocolate candies, decided to price its boxes of candies below the long-term market price. The decision was made to increase market share and discourage oth-er firms from entering the chocolate market. Chocolate Concoctions was implementing a:_________.
a. penetration pricing strategy. b. price lining strategy. c. skimming price strategy. d. variable pricing strategy

Answer 1

Answer:

Option A Penetration Pricing Strategy

Explanation:

The lowest price set below the market price for a long term period is known as Penetration Pricing Strategy. The reason is that the penetration pricing strategy helps the company to make maximum profit by using the price demand relation. In this scenario the company is setting a price which is lowest price in the market and this price brings maximum number of sales and profits. This lowest price makes the competitor's prices unattractive.

Answer 2

Answer:

The correct answer is letter "A": penetration pricing strategy.

Explanation:

Penetration pricing refers to strategy firms follow to set prices initially at a lower rate than normal in an attempt of drawing competitors away. The company hopes that after a certain period, even if it rises the price of the products, consumers will continue buying from them.

If a company abuses the practice of penetration pricing it can become in predatory pricing which is regulated in the U.S. by the Federal Trade Commission (FTC) antitrust laws.