#Price penetration strategy trial#

Apple: Apple used penetration pricing when it launched its iPod in 2001.The company also offered low prices for its services to compete with traditional taxi services and gain market share. Uber: When Uber first launched, the company offered discounts and promo codes to attract new customers.The company set the price of the Kindle significantly lower than other e-readers on the market to gain market share and establish itself as a dominant player in the e-reader market. Amazon: Amazon used penetration pricing when it launched its Kindle e-reader.

#Price penetration strategy trial#

The company’s pricing strategy is based on the concept of getting the customers hooked with a free trial and then converting them into paying subscribers. Netflix: Netflix offers a 30-day free trial to its new subscribers.Market Penetration Strategy: Tactics | Examples | Formula Market Penetration Pricing Examples Therefore, it’s important for companies to carefully consider the potential benefits and drawbacks of this strategy before implementing it. However, market penetration pricing can also have disadvantages, such as creating a perception of low quality or creating unrealistic expectations for future price increases. It can also be used to discourage potential competitors from entering the market, as the low prices may make it difficult for new entrants to compete. This strategy can be effective for companies with a competitive advantage in terms of cost structure, economies of scale, or other factors allowing them to operate profitably at lower prices. Once customers have experienced the company’s products or services and are satisfied, the company can gradually increase prices to more profitable levels. The objective of this strategy is to attract a large number of customers quickly and to create a strong foothold in the market.Ī company can entice customers to try its products or services by offering a lower price than competitors. Market penetration pricing is a pricing strategy in which a company sets a low initial price for its products or services to enter a new market and gain market share. The Economist Magazine: A story of clever decoy pricing effect Market Penetration Pricing Strategy For example, a clothing retailer may open new stores in different cities to expand its market reach. Expansion: A company may expand its distribution channels to reach more customers and increase sales.For example, a technology company may introduce a new smartphone with more features and capabilities. Product innovation: A company may introduce new products or improve existing products to increase its market share.For example, a car manufacturer may run a television ad campaign to promote a new model. Advertising: A company may increase its advertising to raise awareness of its products and increase sales.For example, a restaurant may offer a discount on a certain day of the week to attract more customers. Promotions and discounts: A company may offer promotions and discounts to encourage customers to buy more of its products.For example, a supermarket may reduce prices on certain products to attract more shoppers.

Lowering prices: A company may lower prices to attract customers and increase its market share.

Both can make it difficult to raise prices later. Another potential disadvantage is that the low profit margins may not be sustainable long enough for the strategy to be effective. The main disadvantage of penetration pricing is that it establishes long-term price expectations for the product and image preconceptions for the brand and company.

It can generate high stock turnover throughout the distribution channel, which creates important enthusiasm and support in the channel.

It discourages the entry of competitors.

It establishes cost-control and cost-reduction pressures from the start, leading to greater efficiency.

It can create goodwill among the Innovators and Early Adopters, which can generate more demand via word of mouth.

The strategy can achieve high market penetration rates quickly, taking competitors by surprise and not giving them time to react.

It can result in fast diffusion and adoption across the product life cycle.

The advantages of penetration pricing to the firm are the following: Like skim pricing, penetration pricing shows an awareness of the dynamics in the product life cycle. Why Might Penetration Pricing Make Sense? Penetration pricing offers a lower price in order to draw in a higher demand from consumers.