Penetration pricing strategy

Penetration pricing

In industries where buyers have lots of options, even a small increase in expected price point can dramatically affect your sales volume. Usually, the adoption rate of a new product is exponentially high when you embrace penetration policy as part of your pricing strategy. Finally, penetration pricing can backfire and start price war where your competitors lower their prices, forcing you to lower your prices, and so on. Penetration pricing implies a pricing technique in which new product is offered at low price, by adding a nominal markup to its cost of production, to penetrate the market as early as possible.

Difference between penetration pricing and skimming pricing (with comparison chart) - key differencesMarket  | your business

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Benefits are : achieve high market penetration rate quickly and take the competitors by surprise , not giving them time to react , increase goodwill , cost control / reduction and hence increase efficiency. Competition is always good for the consumer.

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