Go deep with low prices and gain new customers, but be careful that you don't lose profits. Shat from Fotolia. If your business is looking for an aggressive marketing strategy to bring in new customers and switch people's brand loyalty, penetration pricing might be the answer. Penetration strategy offers new products and services for prices far below their value at their initial offering, in an attempt to draw customers away from competing businesses. Penetration strategy is the practice of setting an initial price much lower than the eventual standard price.
What is market penetration pricing? definition and meaning - wynlok.com
Discount penetration pricing is a strategy designed to keep prices low to shut out potential competition. When used in an existing market, it creates a price war. The strategy can be very effective for companies that do their market research carefully and know that they have the resources to make it work. However, it can be difficult to later raise prices and could result in a higher market share with a lower profit potential. Market penetration pricing is a pricing strategy that sets a low initial price for a product.
Penetration pricing is the practice of initially setting a low price for one's goods or services, with the intent of increasing market share. The price may be set so low that the seller cannot earn a profit. However, the seller is not irrational. The intent of penetration pricing can follow any of these paths:.
Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. Penetration pricing is most commonly associated with marketing objectives of enlarging market share and exploiting economies of scale or experience. These are advantages of penetration pricing to the firm: . 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. That makes it difficult to eventually raise prices.