After a certain period or initial offering, you increase the price point to a level that will turn a profit. A lower price point can help brands to penetrate the market, grab the attention of consumers and establish a foothold in the early stages of your business. This pricing strategy is typically used in highly competitive markets. The strategy helps raise product awareness, accrue a customer base and build market share. The goal of a price penetration strategy is to attract the attention of customers and entice them away from your competitors. The strategy involves offering lower prices than any of your competitors for the initial offering. Penetration pricing is a marketing strategy used by new businesses to break into the market and increase sales volume from the outset. In short, a penetration pricing strategy will only work if the product you are selling is of higher quality than your competitors. Quality is more important than brand name. Although reports reveal that 87% of consumers shop around for the best deals, only 8% of the revenue generated by eCommerce stores comes from repeat customers.Īlthough brand loyalty is on the decline, 79% of consumers rank quality as their most important purchasing decision. Consumer psychology is built around the concept of associations. Retaining customers is the key to a successful penetration pricing strategy. There is also a risk that customers will return to a competing brand once you raise prices. Whilst a penetration pricing strategy can increase your sales volume and market share, lower costs mean lower profit margins. A penetration pricing strategy involves setting low prices to raise curiosity and persuade consumers to switch brands. Businesses entering the marketplace with a new product could consider penetration pricing as a means of capturing market share.
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