- A.Price minus variable cost per unit — the dollars each unit contributes to covering fixed cost and profit.
- B.Setting price by adding a standard markup to product cost — simple but ignores customer willingness to pay and competitor prices.
- C.Selling multiple products together at a price below the sum of individual prices — captures revenue from customers who would not buy each item alone.
- D.Launching at a deliberately low price to capture share quickly, then raising once the market is established. ✓
Penetration Pricing is launching at a deliberately low price to capture share quickly, then raising once the market is established. The other options describe related but distinct concepts in Pricing — see the deep-dive guide for the full distinction.
How to think about questions like this
Fast scale captures network effects, deters entrants, and builds installed base. Questions like this test whether you can distinguish Penetration Pricing from neighboring concepts. The most common trap is choosing a closely-related concept that sounds similar but applies in a different context.
When you see a definition question on an exam, do two things: (1) translate the question into your own words, then (2) generate the answer in your own words before reading the options. This avoids the cognitive bias of recognizing a familiar phrase as correct just because it is familiar.