In what type of pricing strategy is a popular commodity offered at prices below cost?

• A. Premium pricing
• B. Price skimming
• C. Loss leader
• D. Penetration pricing

Answer: (C)

The pricing strategy involving offering a popular commodity at prices below cost is known as a loss leader strategy. This approach is often employed to attract customers by selling one or more products at a loss with the hope that, once they enter the store or platform for the low-priced item, they will purchase additional items at regular prices.

This strategy leverages the appeal of a great deal on a well-known product to increase overall sales volume and customer traffic. Retailers frequently implement this tactic to boost footfall or engagement in their store, with the expectation that the increased sales from other, more profitable items will outweigh the losses incurred from the discounted product.

In contrast, premium pricing focuses on setting high prices to signal quality or exclusivity, price skimming involves starting with high prices and gradually lowering them, while penetration pricing entails setting low prices initially to quickly gain market share, which does not specifically involve selling below cost.