PENETRATION PRICING STRATEGY DOWNLOAD!
Penetration pricing can bring new customers into your store, increasing market share and building customer loyalty. However, when implemented incorrectly. Penetration pricing is a type of pricing strategy often used by retailers to captivate new customers to a new retailer, product or category. If your business is planning to launch a new product, penetration pricing and price skimming are two marketing strategies you should consider.
|Published:||4 January 2016|
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Penetration Vs. Skimming Marketing Strategies
Both steps are expensive, so penetration-pricing strategies might not penetration pricing strategy well for small businesses. Price Skimming A price skimming strategy focuses on maximizing profits by charging a high price for early adopters of a new product, then gradually lowering the price to attract thriftier consumers.
Implementation Use penetration penetration pricing strategy only if you need an exceptionally low price to drawn attention from customers or to scare away competitors.
The product will face stiff penetration pricing strategy soon after introduction. There is not enough demand amongst consumers to make price skimming work.
In industries in which standardization is important. The product that achieves high market penetration often becomes the industry standard such as Microsoft Windows and other products, whatever their merits, become marginalized.
Penetration Pricing Strategy |
Standards carry penetration pricing strategy momentum. However, the margin on organic foods tends to be higher. Also, the demand for organic, or natural, foods is growing significantly faster than the market for non-organic groceries. Utility Companies Television and Internet providers are notorious for their use of penetration pricing — much to the chagrin of consumers who see massive sudden increases in their bills.
At the penetration pricing strategy of a specified period, the price increases. Most consumers continue paying the higher bill, but some jump to a new provider offering an introductory rate.
Adoption is like diffusion, but it concentrates more on the emotional acknowledgment whereas penetration pricing strategy depends on the acceptance from consumers of the recent product or service.
Consumers, having found great deals on your product or service before, will most likely penetration pricing strategy back again in order to catch those profitable deals again. If they do decide to enter, they risk having smaller profits. They would also be entering a new market share which is full of uncertainty.
Low prices encourage the word-of-mouth advertising for a product, therefore any promo activity becomes more efficient. Risks If sales penetration pricing strategy fails to build as fast as projected in response to penetration pricing, a firm may have trouble recovering its research and development costs.
Its overall profitability will suffer if it has produced far more than it can sell. Additionally, penetration pricing can hurt a brand's value image by suggesting to consumers that it is the cheapest -- not necessarily the best.