Definition Penetration Pricing. Description.
Penetration Pricing is a market-based approach to pricing
wherein the price is set to a sufficiently low level (below the prices of
competing products) to make the product attractive to the mass market. The
aim is to achieve a large market share by high initial sales. It is introducing
the product at a low price intended to capture the mass market for the product
or service.
It is a particularly attractive mechanism for products where
unit cost reductions can be achieved through
economies of scale. Other
advantages include potentially
fast diffusion and
adoption curves, word of mouth effects, and new competitors are discouraged
from entering the market (compare:
Five Forces). Disadvantage are
the difficulty of raising prices after the desired penetration rate has been
accomplished, and also the pricing mechanism may be detrimental to the perceived
brand value of the product and to the reputation of the company.
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Overview of Pricing and Pricing Strategies
Pricing...
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Compare with:
Competitive Pricing
| Price Skimming
| Cost-plus Pricing
| Standard Cost Pricing
| Marginal Cost Pricing
| Target Pricing
| Perceived Value
Pricing |
Psychological Pricing |
Promotional Pricing
| Discount Pricing
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