Increased Market Share: By offering competitive pricing, the company can appeal to price-sensitive customers, leading to an expansion of its market share.

Quick Market Entry: Penetration pricing facilitates a swift market entry, enabling a company to establish a robust brand presence without delay.

To encourage rapid adoption of a new product or service.

To appeal to price-sensitive customers.

To gain a competitive advantage quickly.

When entering a new market with well-established competitors.

Long-term gain: Once the market share is established and customer loyalty is secured, the company can gradually raise prices and start earning profits.

Short-term profit sacrifice: The business may initially make less profit or even incur losses, as the focus is on acquiring a substantial market share.

Market expansion: Penetration pricing aims to expand the market and attract a larger customer base.

Low initial price: The initial price is set lower than the competitors’ prices, making the product or service more affordable.

Key characteristics of penetration pricing

It prevents new competitors from joining the market.

It may contribute to a quick rise in product sales.

Customers who are accustomed to other brands will be persuaded to switch to the new product by its low pricing.

The company’s new product is already offered by other reputable brands.

The following are the justifications for using penetration pricing: In the short term, penetration pricing reduces earnings however, over time, as the market base grows, profits improve as a result of penetration pricing.

When the product’s market share is maximized-that is, when demand for the product increases-the company will be able to raise the price of the item. If the product is priced highly, it will easily cover the cost of promotion and production. The primary goal of penetration pricing is to attract a significant number of customers by offering an attractive price, ultimately establishing brand loyalty and market dominance. This approach is often used when a business is entering a competitive market or launching a new product. Penetration pricing refers to a pricing strategy in which a new product is given at a cheap price by adding a nominal markup to its cost of manufacturing in order to enter the market as soon as possible. Penetration pricing is a pricing strategy where a company sets a relatively low initial price for a product or service with the intention of gaining a large market share quickly. Similarities between Skimming and Penetration Pricing.Difference Between Penetration Pricing and Price Skimming.Key characteristics of penetration pricing.