Which pricing policy focuses on gaining market share by starting with a low price?

• A. Skimming Pricing
• B. Penetration Pricing
• C. Psychological Pricing
• D. Competition Pricing

Answer: (B)

Penetration pricing is the approach that starts with a deliberately low price to win market share quickly. By offering a low introductory price, a company aims to attract price-sensitive customers, boost sales volume, and build a large customer base. This can also deter competitors and, over time, help the firm achieve economies of scale. Once market share is established, the price may be kept low or raised as brand loyalty and market position firm up. This is different from skimming pricing, which begins with a high price to maximize margins from early adopters; psychological pricing, which relies on price perception rather than actual low price; and competition pricing, which sets prices based on rivals rather than aiming for rapid market share growth.