Which pricing policy aims to attract many customers by initial low price?

• A. Value-Based Pricing
• B. Skimming Pricing
• C. Penetration Pricing
• D. Premium Pricing

Answer: (C)

Penetration pricing uses a deliberately low price at launch to attract a large number of customers and gain market share quickly. The low price stimulates demand and can deter competitors since margins are thin, making it harder for new entrants to compete on price. As sales volume grows, the business can benefit from economies of scale and potentially improve profitability even with the low price, or sustain market share by keeping prices low.

This contrasts with skimming pricing, which starts with a high price to skim early profits from fewer buyers, then lowers the price over time. It also differs from value-based pricing, which sets price according to what customers perceive the product to be worth, not necessarily aiming for a low initial price, and premium pricing, which sets a high price to signal quality or exclusivity.