Which soup company could get away with charging more than its competit

QUESTION

Which soup company could get away with charging more than its competitors, for at least a short time: a long-established company with a nationally recognized brand or a new company with a brand no one has heard of?

Use evidence from the text to support your answer.
What will be an ideal response?

ANSWER

Answer: The nationally recognized brand already has customer trust and is already differentiated from competitors’ products. Customers who like the soup probably have purchased it repeatedly. The new brand has none of that to offer at the outset. Setting a higher price on the established soup may make the product seem of higher quality. Conversely, an unfamiliar product may do better with penetration pricing—setting a low price to attract many customers and deter competition.
Explanation: In competitive pricing, price is determined in relation to rivals, factoring in other considerations such as market dominance, number of competitors, and customer loyalty.