Question

Krishiv manufactures lamp shades in his cottage industry where labour intensive techniques are used. He is selling these lamp shades under the brand name 'U-lite'. They are in great demand as nowadays interior designers are using lamp shades to give an aesthetic look to the houses they design. For Krishiv, the per unit cost of each lamp shade is ₹ 450 and he sells it for ₹ 900. Similar lamp shades are available in the market and on online websites in the range of ₹ 1,000 ₹ 1,100 per unit. The pricing strategy used by Krishiv is the one where the price of the product is initially set at a price lower than the eventual market price to attract new customers. His objective is to increase the sales volume, rather than to make profit in the short-run. The pricing strategy adopted by Krishiv is:

Options

• Cost plus pricing

• Penetration pricing

• Skimming pricing

• Variable pricing

Answer 1

Penetration pricing

Explanation:

The idea behind a penetration pricing plan is that consumers will move to the new brand due to the lower cost.