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Consider a situation in which a coffee chain opens across the street from a locally owned cafe. Theoretically, the prices at both stores should be similar because the costs and customer demand will be similar. However, because the coffee chain can rely on corporate backing for support, it makes the decision to radically lower prices, attracting more customers to its facility and eventually driving the competition out of business. This scenario illustrates which ethical issue in pricing?.

Respuesta :

This scenario illustrates Penetration Pricing ethical issue in pricing .

Penetration Pricing is the strategy to drive out the competition by lowering the price.

What does the term "penetration price" mean?

  • Using a lower price during the initial offering of a new product or service, firms utilize penetration pricing as a marketing approach to draw clients to the new offering.
  • A new product or service can more easily enter the market and draw clients away from rivals thanks to a reduced price.

What are some examples of penetration pricing?

  • When you walk into a grocery store, you frequently see advertisements for introductory sales on certain fresh items, which are ideal examples of penetration pricing.
  • In order to boost demand for their organic products, Costco and Kroger apply penetration pricing to those items.

Learn more about Penetration Pricing

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