Another MC.... (1 Viewer)

[Michaelmoo]

ABC Industries has developed a new type of mousetrap. To have the product gain acceptance in a competitive market quickly, they have decided to launch it at a lower price than existing competitors. What is this process called?

(A) Cost-plus pricing
(B) Price skimming
(C) Penetration pricing
(D) Competition pricing

Answer + discuss?

EDIT: There's no typo above. It's written exactly like that.

 

[charleshuang]

ABC Industries has developed a new type of mousetrap. To have the product gain acceptance in a competitive market quickly, they have decided to launch it at a lower price than existing competitors. What is this process called?

(A) Cost-plus pricing
(B) Price skimming
(C) Penetration pricing
(D) Competition pricing

Answer + discuss?

EDIT: There's no typo above. It's written exactly like that.

Is it D

 

[jovceski123]

The answer is D. Businesses often choose prices according to what the competitors are selling for. In this case to gain for market share the business is launching a price lower than existing competitors.

 

[lolrofllol]

Hmm, I would have answered C because they are penetrating the market with low prices... But I tend to get these types of questions wrong..

 

[bmn]

The wording of the question makes it pretty obvious that its D... C is still correct, but D is the most correct.

 

[Absolutezero]

Although competition prices doesn't always involve setting a lower price than competitors. It involves using competitors prices as the basis of your own.

To have the product gain acceptance in a competitive market quickly[/q

This leads me to think C, as:
Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.


Then again, too much thought often leads to wrong answers in business studies...

 

[sickk]

C - penetration pricing

setting lower than market price to get initial foothold in the market. if the market is so competitive, the only way to break into it would be penetration.

competition pricing is when you set your prices according to what the competition is, for example if th eleading moustrap company is charging $4 for a moustrap, then you do to.
penetration = setting lower, because the only way someone is going to buy your mousetrap over the most popular one is if there is some kind of incentive, ie cheap as

 

[lyounamu]

^wholeheartedly agree with above

I would go for C which is way more correct.

Also:

Both C and D seem right (in theory) but what we must be conscious of is...there is no such thing as competition pricing (even though we interpret that as setting price according to competitors). There are METHODS and STRATEGIES.

Methods:
- Market-based
- Competition-based
- Cost-based

Strategies:
- Skimming pricing
- Penetration Pricing
- Loss leaders
- Price points.

 

[disFUNKshunal]

the answer is C.

 

[H4wk1n4t0r]

Answer should be C. The question clearly states gaining "acceptance in a competitive market quickly", i.e. market share, with prices lower than the competition, which is price penetration. Competition pricing is just based on prices of other competitors, and can involve setting prices lower or even higher than competition. While this is partly true, it is not specific enough, and C is the most correct option.

 

[Eddykungfu]

C..

Competition Pricing isn't a Pricing Strategy, but a method.

In the question, it refers to the objective of increasing market share in the Short term

Therefore this is Penetration pricing.

 

[BUSINESSKING]

It's a very bad question, and is almost completely ambiguous;

Price penetration is a PRICING STRATEGY which involves setting the price at the lowest level possible [implying the lowest level while still making a profit - if it involves making a loss, it falls under the 'loss leader' strategy] to gain market share quickly.

Competition-based pricing is a PRICING METHOD which involves basing the price on the business' competitors - it can be either below, equal to, or above the price of competitors, depending on the strategy and goals required.

We cannot distinguish whether the question is requesting a strategy or a method ('process' could refer to either of them), and there are elements of both choices in the question.

Looking at the question closely, it seems that (D) - Competition-based seems to fit best as an answer, but to be honest I believe the answer decided as 'correct' would be (C) - Price penetration.

Very bad question.