UGC NET COMMERCE January 2017(Paper-II) Q15
0. For the success of the penetration price policy, which one of the following is not desirable?
- Option : C
- Explanation : A penetration pricing policy involves setting prices of products relatively low compared to those of similar products in the hope that they will secure wide market acceptance, which will allow the company to raise the prices at a later date. Such a policy if often adopted when the firm expects competition from similar products within a short time and when largescale production and marketing will produce substantial reductions in overall costs. The low price is adopted with the aim of keeping out the competition and it is essential that the company should maintain its low-price position since the market is highly price sensitive. Production and distribution costs are expected to fall as sales volumes increase. A penetration pricing policy is appropriate when demand is elastic. The marketers obtained as many customers as possible through a low price and established a position for their product in the market.
