IGCSE Travel and Tourism Practice Exam

Which pricing technique is designed to attract initial customers but is expected to increase over time?

1. Market skimming pricing

2. Market penetration pricing

3. Loss leader pricing

4. Special offers

The correct answer is: Market penetration pricing

The pricing technique designed to attract initial customers with the expectation of increasing prices over time is market penetration pricing. This strategy involves setting a low initial price for a new product or service to quickly attract a large number of customers and gain market share. The goal is to encourage consumers to try the product at a lower cost, making it more accessible and appealing. Once the business establishes a customer base and brand loyalty, it can gradually raise prices without losing significant market share, as customers are already engaged with the product. In contrast, market skimming pricing targets consumers who are willing to pay a higher price for a new or innovative product, typically used in the introductory phase to maximize profits. Loss leader pricing involves selling a product at a loss to draw customers into a store or service, hoping they'll make additional purchases. Special offers are typically short-term discounts or incentives to encourage immediate sales but are not necessarily indicative of a planned increase in pricing. These techniques do not share the same long-term strategy of starting low with an intention to increase prices as market penetration pricing does.