This undercuts competitors, leaving them with little or no time to respond. High price limitation is removed and the new product is offered to consumers to try out at a below-average market price. Usually, after a growth period during which the company has sliced through a large chunk of its competitors' customer base and gained new customers, the company gradually raises its price to reflect its value and maximize profit. The idea is that by offering a low initial price, rapid demand for the new product is induced, enabling the company to build a customer base within a short time frame while maximizing brand loyalty. As a marketing strategy, price penetration aims to stimulate market growth, capture market shares, and maximize sales volume. What Is a Penetration Pricing Strategy?Ī penetration pricing strategy is when business owners lower the entry price of their new product or service to attract new customers. This article will focus on the price penetration strategy, its pros and cons, and how you can implement it in your own business. Several pricing strategies exist, suitable under different economic and marketing conditions. Your first step toward getting your pricing right is choosing the appropriate pricing strategy. Profit maximization is at the core of every business. In reverse, by setting a low price, you attract more customers but may not realize your long-term profit motives. The reason is that by setting a high price, you can lose sales opportunities and revenue. Therefore, setting the cost of your new product too high or too low can be counterproductive to your profitability. Think about it - the business world is overcrowded, competition is stiff, and many consumers are price sensitive. One vital decision you have to make as a business owner is deciding the price of your products.

Market penetration pricing strategy