Assertion: It is easier to to eventually raise prices in case of Penetration pricing. Reasoning: Some commentators claim that penetration pricing attracts only the switchers (bargain hunters), and that they will switch away as soon as the price rises.

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A. Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A. Assertion (A) is true but Reasoning (R) is not correct. Assertion (A) is not true but Reasoning (R) is correct.

Assertion (A) is not true but Reasoning (R) is correct.

The main disadvantage with penetration pricing is that it establishes long–term price expectations for the product and image preconceptions for the brand and company. This makes it difficult to eventually raise prices. Some commentators claim that penetration pricing attracts only the switchers (bargain hunters), and that they will switch away as soon as the price rises. There is much controversy over whether it is better to raise prices gradually over a period of years (so that consumers don’t notice), or employ a single large price increase. A common solution to this problem is to set the initial price at the long term market price, but include an initial discount coupon. In this way, the perceived price points remain high even though the actual selling price is low.