Advantages of price penetration

Unfortunately, the answer you are trying to submit has already been added. Skimming Strategy Skimming is the process of setting high prices based on value. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than to make profit in the short term. Often attract price sensitive and disloyal customer tend to switch for better deals. Faster Growth If your primary business and marketing objective is to grow your customer base and revenue, penetration pricing is the way to go. Penetration pricing and skim pricing are the two broad pricing strategies commonly used by companies when opening new stores or launching new products. Aggressive companies often use penetration pricing to stave off hungry competitors or to combat the efforts of competitors.

What is the reason for the downfall of the product? Aggressive companies often use penetration pricing to stave off hungry competitors or to combat the efforts of competitors. You offer a relatively low upfront price that attracts customers or lures them away from higher-priced competitors. If you buy chocolate bars or potato chips crisps you expect to pay X for a single packet, although if you buy a family pack which is 5 times bigger, you expect to pay less than 5X the price. Tim Friesner Marketing Teacher designs and delivers online marketing courses, training and resources for marketing learners, teachers and professionals. Click below to take advantage of this opportunity.

Thus, potential competition is kept away. Penetration pricing often has the effect of blocking, or at least delaying, competition. Views Followers 2 Upvote 3. Earn certificates of completion. Market penetration pricing can be a great strategy for companies planning to introduce new products. You may be able to maintain a decent level of profits due to the volume of sales decreasing your costs per unit for the product.

You can also achieve market penetration through aggressive marketing campaigns and distribution strategies. Companies that are new to exporting cannot absorb losses arising out of penetrative price. The marketing mix should take into account what customers expect in terms of price. Disadvantages include lower profit margins, possible harm to your company's image, and the risk of a pricing war. It is used to acquire and hold a share of market in a competitive environment. Manufacturers of digital watches used a skimming approach in the s. Study Aid 1 chapters 5 lessons.