#Penetration pricing examples free

More specifically, you can use a better mix of product benefits and a lower price to entice the even minimally pleased consumers with the current items. The use of penetration pricing aims to lure a bigger portion of customers away from your competitors. To entice customers, penetration pricing depends on a low initial price, whereas skimming is using high initial prices to maximize short-run profits from the most willing and engaged consumers. Both techniques can be effective for firms however, a good grasp of a relationship between your price and your overall marketing and promotions strategy. Pricing penetration and price skimming are marketing strategies typically applied once businesses promote new goods or services.

Penetration pricing and Skimming pricing Penetration pricing and Skimming pricing Therefore, if another rival is constantly selling the product that has the same quality but a lower price, your customer may abandon your brand forever.

Therefore, if you do not meet margins, and if you raise prices, the customer may go for a cheaper brand. The low initial price has led the customers to expect permanent low prices. After one month, when the prices increase, you will end up using this product. If you have to choose one among different cookies that are of the same quality, you may select the cheapest one based on your budget. It is an intrinsic essence of the penetration strategy, where you are enticing the customers from another brand to yours. The penetration pricing may entice the inappropriate type of customers that are fonder of the lower price after the bargain instead of attracting the probably loyal ones. However, bear in mind that if you adopt this strategy, only the product’s profitability, efficiency, and your approach to minimize unit costs from the beginning can determine your performance.Ī shortcoming of price penetration relies on the type of your targeted customers and your choice to identify brand loyalty in your customers. Besides, new entrants into the market may face up to the barriers that you create. Besides, brands of the items may not be something they care about.įrom the marketing perspective, this pricing strategy can result in a rise in market share and sales volumes once you have lowered the prices. For example, for products with elastic demand like soaps and shampoos in the market, among various price points, you will find the lower price. As many customers feel appealed to the lower price, penetration pricing offers the business a competitive advantage.įor most of the occasions when you shop in the supermarkets, you can see a typical sign of penetration pricing strategy that is “special introductory offers”. In practice, newcomers in the industry will get the most out of the penetration pricing strategy when the level of saturation of the market is high or the market witnesses many variants of the same product.

#Penetration pricing examples free

In real life, you can see penetration pricing in a one-month free subscription of an online news website or a six-month free checking account of a bank, or many more. The strategy will help them to attract new customers away from competitors and retain them when rates go up to normal levels afterward. More specifically, they build market share by offering a lower price when they first come to the market. This marketing strategy helps businesses to attract customers to try a new product or service. Penetration pricing break down Penetration pricing break down Pricing penetration is adopted with the hope of increasing market share and enhancing economies of scale. By doing this, the consumers that interested in a lower price are expected to move to the new brand. What is penetration pricing Penetration pricing Definition What is penetration pricing?Īccording to Wikipedia, penetration pricing is a pricing strategy in which the price of an item is originally set low to quickly reach a significant proportion of the marketplace and encourage word of mouth. Now, let’s discover this pricing strategy and decide whether you can apply it to your company. In this article, we will describe What is Penetration Pricing? Pros, Cons & Examples. Well, if you are the later comer in the market, you should consider using the penetration pricing strategy. If you offer your products or services to your customers, then you must wonder which is the most effective pricing strategy.