![]() The penetration price isn’t meant to be sustainable - it’s meant to increase over time (and hopefully retain a loyal customer base with it).īecause of its versatility, all types of companies use it. SynonymsĬompanies use penetration pricing when they’re chasing brand awareness, sales volume, or user adoption over short-term revenue and profitability. Vendors must also be transparent about their intention to raise their price so as to not frustrate the customers they gain. Since penetration pricing works on the assumption that customers will be happy enough with the product to pay a higher price, product-market fit, overall quality, and customer retention efforts are essential to its success. The idea behind this strategy is that with a greater market share and higher sales volumes, a company can eventually lower production costs and turn over inventory more quickly. ![]() Similar to loss leader pricing, its main goal is to attract the maximum number of potential customers, even if it means reducing profit margins or taking a loss. Free listings to attract sellers to a marketplace.A low-cost beta version of a SaaS product that’s set to rise in price after launch.A special six-month discount for switching from a competitor.A buy-one-get-one-free (BOGO) offer for this weekend only. ![]() Once it gains enough traction (i.e., market penetration), the business will either increase the price to a sustainable level or keep it low to continue drawing new customers.Ī penetration price could either be temporary or baked into its long-term growth strategy. Penetration pricing is a pricing strategy where a business introduces customers to its product at a low price, often significantly below the eventual market price, to draw them in and gain market share quickly. ![]() Data Required for Effective Penetration Pricing.Intuit accepts no responsibility for the accuracy, legality, or content on these sites. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. We provide third-party links as a convenience and for informational purposes only. Readers should verify statements before relying on them. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Accordingly, the information provided should not be relied upon as a substitute for independent research. does not have any responsibility for updating or revising any information presented herein. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Applicable laws may vary by state or locality. Additional information and exceptions may apply. ![]() This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Otherwise, if you’re just starting, consider a penetration pricing strategy. If you already have a competitive advantage, the premium pricing strategy could be an option. However, you’ll need to consider what your competitors charge and if you’re trying to penetrate the market.
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