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Penetration price2/4/2024 ![]() ![]() Competitors, in this case, do not get ample time to respond, which enables the company to acquire a considerable chunk of market share and establish itself as a new standard choice.Prices get intentionally set low so that customers try the product/service.It usually works during the introductory phase of the product life cycle when companies launch any innovative product or service.The market penetration pricing takes advantage of the existing markets as the pricing is usually marked cheaper than the market price. Penetration pricing is a market strategy sometimes used by new companies to attract the new and vast majority of customers. How Does the Penetration Pricing Strategy Work? And Samsung caters to a much broader consumer base. These low prices entice customers, which is why, while Apple sells expensive products to a smaller section of the market, Samsung sells cheaper phones. It also partners with cell phone companies and offers attractive discounts on its products in exchange for long-term commitments, hoping to build strong brand loyalty. On the other hand, Samsung offers comparatively much lower prices for Android phones. Over the years, due to a significant increase in the brand loyalty of Apple, its customers believe that its products are of high quality with better features. Apple offers high prices while introducing its new products. Many other OTT platforms also deployed this strategy later to attract new customers.Īnother great example could be comparing two smartphone companies like Apple and Samsung. Once users get hooked to the forum, they are more likely to pay for the coming months rather than miss out on the many series available. The perfect example of penetration pricing done right is Netflix.įor every new subscriber, Netflix initially provided a one-month free subscription to try out all the content on the platform. ![]() Such an assumption could hamper the brand’s image significantly, making it harder to compensate for the initial low prices in the future.Įxamples of Penetration Pricing Strategies Low prices could make the customers assume the brand is cheap or low quality.The market penetration pricing is more likely to attract bargain hunters who may switch to any better deal than they get from any of the competitors in the market. The penetration pricing strategy demands a lot of customer loyalty, which can be very difficult in the current market.And as a result, stop purchasing the product. Hence, when the business eventually decides to return to the typical costs of the products, the customers could be dissatisfied. Customers may expect low prices permanently.The penetration pricing strategy requires a high sales quantity, enabling a firm to realize economies of scale and keep a check on its marginal costs.ĭisadvantages of Penetration Pricing Strategy.Then, implement them into your product or service.Ĭhisel’s Feedback portal tool lets your target audience share their ideas and opinions in an organized way. One of the most effective ways to boost customer loyalty is by gathering customer feedback and ideas. It helps create a positive atmosphere around the product and even increases customer loyalty. New businesses can build goodwill with many consumers by starting at lower, inexpensive prices. Customers can find a bargain on a product they had been paying for heavily earlier.In that case, they may even stick to it after the prices revert to their normal levels, which is the whole point of this strategy. Suppose the product matches the customers’ expectations. Naturally, customers are attracted to a product/service offered at a lower cost than its competitors. Penetration pricing strategy provides market dominance for a product at its initial stages.Advantages of Penetration Pricing Strategy ![]() With the help of product management tools like Chisel, you can create and manage product roadmaps. ![]() If not, this oversight may come back to haunt them later. The companies must also ensure they have a clear roadmap for compensating for these low prices in the long term while employing this plan. This way, when a large group of customers has tried their product, they may hike their prices and still keep most of those customers. Here, you offer the product at a lower price which helps the product to “penetrate” the market and look appealing to the customers.Ĭompanies use the penetration pricing strategy to garner a more significant chunk of the market audience and cut their competitors’ market share during the initial stages of the launch itself. Penetration pricing is a marketing strategy businesses employ to attract customers while launching new products or services in the market. The product’s lower price is offered, which helps it “penetrate” the market and appeal to the customers.” “Penetration pricing is a marketing strategy businesses employ to attract customers while launching new products or services in the market. ![]()
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