A business sets the price of a range of furniture at below cost price - HSC - SSCE Business Studies - Question 1 - 2007 - Paper 1

The pricing strategy being used in this scenario is known as the Loss Leader strategy. This approach involves setting the price of certain products, in this case, furniture, below their cost to attract customers.

Explanation:

The objective of a loss leader strategy is to draw customers into the store or to a particular product with the intent of them purchasing additional items that have higher profit margins. By pricing the furniture below cost, the business aims to increase foot traffic or sales volume, expecting that customers will purchase other items at regular prices.

Other Options Explained:

• Penetration Pricing: This strategy involves setting low prices initially to gain market share, not necessarily below cost.
• Price Point: Refers to a specific price level at which a product is marketed, but does not imply pricing below cost.
• Skimming: This strategy sets high prices initially and then lowers them over time, which is the opposite of pricing below cost.