IGCSE Travel and Tourism Practice Exam

What pricing strategy involves setting a low price to gain entry in the market?

1. Market skimming pricing

2. Discount pricing

3. Market penetration pricing

4. Loss leader pricing

The correct answer is: Market penetration pricing

The pricing strategy that involves setting a low price to gain entry into the market is referred to as market penetration pricing. This approach is designed to attract customers quickly and encourage them to try a new product or service by making it more affordable than that offered by established competitors. By initially setting a low price, a business can build a customer base and increase market share rapidly. Once the business has established itself and gained a foothold in the market, it may then gradually raise prices as customers become accustomed to the product and its value. This strategy is particularly effective in competitive markets where price sensitivity is high and can create strong brand loyalty if executed well. The other methods of pricing serve different purposes. Market skimming pricing aims to maximize revenue by initially setting a high price when a product first launches and then lowering it over time. Discount pricing involves temporary reductions to encourage sales but does not specifically focus on gaining market entry. Loss leader pricing sets certain products at a loss to attract customers into a store, but it is not specifically about entering a market with a low entry price point.