Rupali intends to start an enterprise that will produce healthy alternatives for chocolates and sugar cravings. In order to assess the taste preferences of people and possible options for flavours she conducted an online survey. Based on the information collected she analysed the market and decided to launch coconut, jaggery and sesame based chocolates under the brand name Coco Demerara. She decided to fix the price of chocolates at a relatively lower level in the beginning and later on as the demand picks up she may revise the price. (a) Identify the pricing strategy used by Rupali for her chocolates. (b) State the marketing objective of the pricing strategy opted by Rupali. (c) Mention any two advantages of the pricing strategy to the firm.

Question

Accepted Answer

(a) The pricing strategy used by Rupali is **Penetration pricing**. She decided to fix the price of chocolates at a relatively lower level in the beginning and later revise the price as demand picks up. This is characteristic of penetration pricing where a product is initially priced lower than the eventual market price.

(b) The marketing objective of penetration pricing is **increasing market share or sales volume**, rather than making profit in the short term. The strategy works on the expectations that customers will switch to the new brand because of the lower price.

(c) Two advantages of penetration pricing to the firm are:
1. It can result in fast diffusion and adoption, achieving high market rates quickly and taking competitors by surprise.
2. It creates goodwill among the early adopters segment, which can generate more trade through word of mouth.