When companies consider implementing a penetration pricing strategy, they should evaluate their customers’ thoughts on the importance of brand recognition and loyalty. There are various aspects to consider when it comes to penetration price. People may grow dissatisfied with rising costs and stop buying the product or service or switch to a lower-cost competitor who offers a better deal. If a company uses penetration pricing to acquire new consumers, people may expect consistently low prices for a product or service.Companies can also get a significant part of the market before competitors react to their pricing strategy.As a result, any corporation should avoid using penetration pricing as a long-term pricing strategy. Customer contentment cannot be assured, and in some situations, customers may continue to be a financial drain.The rapid influx of new customers who see the product’s value and believe they are getting a good deal. There are various benefits to using penetration pricing, but some substantial potential negatives to consider. Pros And Cons Of Using A Penetration Pricing Strategy The aim is that the higher sales volume will compensate for the lower cost. Following a time of expansion, the company often raises prices to boost profits and reflect the increased value of the product. Customers of competitors may migrate to the cheaper offer, and new customers may join as well. The low initial price forces competitors to match the offer or quickly implement different techniques. It is the practice of setting a low initial price for a product to make up for it in the long run by upselling or cross-selling to newly gained customers.īusinesses use penetration pricing to introduce a low price for a new product or service. The penetration pricing strategy, often known as the “land and grow” method, is a pricing strategy used by businesses (especially in the SaaS industry) to penetrate or infiltrate new markets or rapidly expand in existing markets by charging higher prices. Definition Of A Penetration Pricing Strategy
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