![]() When prices increase, those customers may become dissatisfied and stop purchasing the product or service, or find another lower price competitor. If a company uses penetration pricing, customers may begin to expect permanently low prices for that product or service. Karena mampu menerapkan harga yang rendah di dalam proses pemasaran, penetration pricing memungkinkan suatu produk atau jasa bisa lebih mudah dan cepat diterima oleh pelanggan. Penetration pricing also allows companies to gain a large majority of market share before their competitors can react. Therefore, penetration pricing is not recommended as a long-term pricing strategy for any business. Penetration pricing is a great way to gain market share quickly, but if you do not have a lot of cash on hand then you might find yourself insolvent before you become established in the market. However, this is not a guarantee, and sometimes customers could remain a financial drain. The hope is that these customers will grow loyal to the product or brand, and buy-in to any upsells or cross-selling. The first advantage of penetration pricing is attracting a quick influx of new customers who see the value of the product, and feel they’re getting a good deal. Penetration pricing has a few advantages, but there are some important potential pitfalls to consider as well. Another potential disadvantage is that the low-profit margins may not be sustainable long enough for the strategy to be effective.Advantages and pitfalls of a penetration pricing strategy Both can make it difficult to raise prices later. 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.Experts define penetration pricing as a pricing tactic used quickly to gain market share by setting a low price for products initially, aimed at enticing customers. The aim of penetration pricing is to attract a loyal customer base through offering the most competitive price in the market and undercutting rivals and well-known brands. It can create goodwill among the Innovators and Early Adopters, which can generate more demand via word of mouth. Market penetration pricing strategy is a promotion technique used by firms to attract new customers to a new product or service. Penetration pricing is a strategy used by a firm who wishes to enter a new market and gain a high market share through selling at a low price. Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth.It is a very common strategy that new incumbents adapt in a market. The seller may sell the product at a loss to gain market share from established players in the market. There are two options for accomplishing this. Market penetration pricing is defined as offering a product or service at a lower cost to achieve a greater market share in a particular market segment. An effective penetration strategy ensures that a company not only gains customers for a single transaction, but also keeps them as long-term customers. The strategy can achieve high market penetration rates quickly, taking competitors by surprise and not giving them time to react. Penetration Pricing works by presenting an initial price that is significantly lower than the market’s going rate. It can result in fast diffusion and adoption across the product life cycle. an approach to pricing in which a manufacturer sets a relatively low price for a product in the introductory stage of its life cycle with the intention of building market share.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 higher demand from consumers. If the initial price is set low, at $2, for instance, the quantity demanded will be high: 400 units. Returning to our economic model, below, you can see that penetration pricing focuses at the bottom of the demand curve. Penetration pricing is most commonly associated with marketing objectives of enlarging market share and exploiting economies of scale or experience. The strategy works on the assumption that customers will switch to the new product because of the lower price. Penetration pricing is a pricing strategy in which the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. 206 Reading: Penetration Pricing What Is Penetration Pricing?
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