Question

The management at Allied Electronics is having difficulty in raising the introductory price on system components to cover the increased costs of producing the sensing devices for home security systems. Apparently, Allied used a(n) ____ strategy in pricing these components.

Answer 1

Answer: Penetration Pricing strategy.

Step-by-step explanation:

Penetration pricing is a marketing strategy used by businesses to entice customers to try its new product or service by offering lower prices and hopefully keeping them even when the prices rise to its initial levels. This strategy helps to effectively attract customers since a lower price helps a new product of a good or service penetrate the market faster and helps build competitive advantage from its competitors. Examples include a communication company offering a month free for data subscription or text messages if consumers download their app from google play store.

This market penetration pricing strategy may not be sustainable for a long time because low prices in as much ad they cause increase in sales volume do not guarantee increase in profits especially if competitors also reduce their prices making such company using this strategy run loss.

Here Allied Electronics are having difficulty in raising their price to initial level because they adopted the Penetration pricing market strategy.