What is Penetration Pricing?
Penetration pricing is a pricing strategy in which a company sets a low price for a new product in order to quickly gain market share and establish a foothold in the market. This strategy is often used by companies that are introducing a new product or entering a new market and are looking to attract customers by offering a lower price than their competitors.
The goal of penetration pricing is to quickly capture a large share of the market by offering a lower price than competitors and making the product more accessible to a larger number of consumers. This can help the company establish itself as a market leader and create a strong brand presence. Once the company has established itself in the market and has a significant share of the market, it may then gradually increase the price of its product to maximize profits.
Penetration pricing can be an effective way to quickly gain market share, but it can also be risky. The low price may not be sustainable in the long term, and the company may need to rely on other strategies, such as improving the quality of its product or offering additional features, to maintain its market share and increase profits. It is important for companies to carefully consider the potential risks and benefits of using penetration pricing before implementing this strategy.