ABC company is introducing new soap in the market. Which pricing strategy would be more appropriate? Give any four reasons.

Pricing Strategy — Penetrating Pricing

For introducing a new soap in the market, Penetrating Pricing would be the most appropriate strategy. This involves setting a low initial price to capture as large a market as possible.

Four Reasons:

1. Highly elastic demand — Soap is an FMCG product where demand is highly sensitive to price. By reducing price, demand can be increased to a large extent. A low initial price will encourage customers to try the new soap.
2. Strong competition — The soap market is highly competitive with several established brands like Lux, Dove, Lifebuoy, etc. Penetrating pricing helps the new soap restrict the entry advantage of competitors and gain market share quickly.
3. Mass market product — Soap is a product used by the masses across all income levels. Aiming to sell to the masses is more profitable than targeting niche segments. A low price ensures wide acceptance.
4. Economies of scale — Soap manufacturing benefits from substantial economies in unit cost when produced and sold in large volumes. Low prices enable high sales volume, which reduces per-unit cost.

(Example: 'Nirma' detergent powder used penetrating pricing to capture the mass market and displace the higher-priced 'Surf' in India.)