Price Quotes and Pricing Decisions Applied Problems Assignment

Price Quotes and Pricing Decisions Applied Problems - Assignment Example Jessica is a famous actress and her name is common in most households. She may even have a cult like following meaning everything she endorses will be popular with the masses, this factor can make penetration pricing successful. The products they are dealing with are basic consumer products used in the house hold on a daily basis. Penetration pricing would set of a â€Å"price war" enabling them to market a product at the price that is the  lowest in comparison with all competitors.   Though the price is lower that the value of the product, it will draw in new customers to try the products The products that the â€Å"Honest Company† deals in are in a growing market as the population is more demanding and knowledgeable requiring more quality cleaning items, more nutritious food stuffs etc. hence penetration pricing is recommended. Penetration pricing can prevent competitors from cutting into your market at lower price points. If your upfront price is low and your product or service is of reasonable quality, the burden falls on other providers to justify higher prices on similar offerings Yes they will continue to make profits in the long term. The Honest Company will be able to enter the five different markets faster using penetration pricing as potential customers will venture to try the product. This will in turn grow their market share and generate economic profits based on this market share even in the long term. Penetration pricing also creates high stock turnover throughout the  distribution channel which will result in economic profits and increased enthusiasm and support in the supply chain for the product in the long term. No they will not continue to make profits. It is argued against penetration pricing in that in the long term penetration pricing establishes long term price expectations for the  product, and image preconceptions for the  brand  and company. This makes it difficult to