IAI Actuarial Core Principles · Business Economics · Pricing strategies in the financial services sector
A new Indian insurtech firm launches a health plan priced below the market leader to build its customer base quickly, accepting low early margins. Which strategy is this?
This is penetration pricing: a new entrant sets a low initial price to win customers and market share quickly, accepting thin early margins in the expectation of building volume and later profitability.
- APenetration pricingCorrect
- BPrice skimming
- CPremium pricing
- DPrice leadership by the dominant firm
- Bundle pricing
Explanation
Penetration pricing sets a low initial price to gain market share fast, with margins rising later through scale or loyalty. Skimming and premium pricing involve high prices. Price leadership means rivals follow a dominant firm's price, which a new entrant is not. Bundle pricing combines products, which is not described.
Did you get it right without looking?
One question tells you little. A timed set on Pricing strategies in the financial services sector shows your real accuracy, how long you take and where you lose marks.
More Pricing strategies in the financial services sector questions
- In an oligopolistic general insurance market, a kinked demand curve model is used to explain why premiums for motor cover stay stable. Which…
- A life insurer offers two policy menus without knowing customers' health: Policy X has full cover at a high premium; Policy Y has partial co…
- Which of the following is the main weakness of full-cost (cost-plus) pricing for a financial services firm?
- A health insurer offers the same policy cover at a lower premium to employees of large corporate groups than to individual buyers, even thou…
- A mutual fund house charges a lower expense ratio for large institutional investors than for retail investors, who are less price-sensitive.…
- A bank offers a higher savings rate only to customers who maintain a Rs 10 lakh balance and give up easy withdrawal. Compared with a single …