You often see the tagline "special introductory offer" — the classic sign of penetration pricing. The aim of penetration pricing is usually to increase market share of a product, providing the opportunity to increase price once this objective has been achieved. Penetration pricing is the pricing technique of setting a relatively low initial entry price, usually lower than the intended established price, to attract new customers. The strategy aims to encourage customers to switch to the new product because of the lower price. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume. In the short term, penetration pricing is likely to result in lower profits than would be the case if price were set higher.
What Is Market Penetration Pricing? | valeriemillett.com
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. This strategy essentially represents a price war, going for the deepest possible price cuts and aiming for your price to always be the lowest on the market. Penetration pricing can bring new customers into your store, increasing market share and building customer loyalty.
Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. Market penetration pricing relies on the strategy of using low prices initially to make a wide number of customers aware of a new product. Penetration pricing examples include an online news website offering one month free for a subscription-based service or a bank offering a free checking account for six months. Penetration pricing, similar to loss leader pricing , can be a successful marketing strategy when applied correctly.
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: [3]. 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.