Penetration pricing definition

This article describes a pricing strategy used by sellers, typically in markets that suffer from imperfect competition, significant transaction costs or imperfect information. If the product has a short life cycle and goes out of date within a short period, the loss suffered by the marketer will be huge. They launch at a low price in an attempt to achieve product diffusion. TomorrowMakers Let's get smarter about money. This strategy is implemented by the marketers for achieving the high ratio of sale for their new product by keeping it economical.

Along with generating more sales from existing customers, market penetration pricing lets businesses find new buyers that may not be willing to pay higher prices for similar goods. What is Knowledge Work? As against the object of using skimming pricing strategy is to earn maximum profit from the customers, by offering the product at the highest price. Penetration strategies are frequently used by companies that need to exhaust their spare resources. They do this in order to put their competitors out of the market. I have forgotten my password. Prices are low to attract attention and buyers.

Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented. View all posts by Tim Friesner. Why and When to use it: Small businesses or those in niche markets can benefit from price skimming when their products or services are differentiated from competitors' and when synonymous with quality and a positive brand image. Costco and Kroger, two major grocery store chains, use penetration pricing for the organic foods they sell.

What is Predatory Pricing? Capturing initial market share with a low price. If the product has a short life cycle and goes out of date within a short period, the loss suffered by the marketer will be huge. It creates goodwill for the company if customers perceive that they are purchasing a high-quality product at a fair price. The Essentials; Lawrence J. A hypothesis, story or procedure that is invented in order to examine its consequences.