Which of the following are conditions to apply Penetration Pricing? A) The product's quality and image must support its higher price and enough buyers must want the product at that... Which of the following are conditions to apply Penetration Pricing? A) The product's quality and image must support its higher price and enough buyers must want the product at that price. B) The cost of producing a smaller volume cannot be so high that they cancel the advantage of charging more. C) Competitors should not be able to enter the market easily and undercut the high price. D) The market must be highly price sensitive.
Understand the Problem
The question is asking to identify the conditions under which penetration pricing strategy can be effectively applied. This involves analyzing the four listed conditions to determine which are valid for implementing this pricing strategy.
Answer
Conditions: B and D.
The conditions to apply penetration pricing are: B) The cost of producing a smaller volume cannot be so high that they cancel the advantage of charging more. D) The market must be highly price sensitive.
Answer for screen readers
The conditions to apply penetration pricing are: B) The cost of producing a smaller volume cannot be so high that they cancel the advantage of charging more. D) The market must be highly price sensitive.
More Information
Penetration pricing involves setting a low price to enter a competitive market and gain market share. It's effective in highly price-sensitive markets and where cost advantages exist at larger production scales.
Tips
Confusing penetration pricing with price skimming, which involves higher initial prices to recoup development costs.
Sources
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