Penetration Pricing


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Penetration Pricing

The practice of undercutting competitors' prices in order to establish and gain market share. Penetration pricing is most common when a company is introducing a new product in an already saturated market. It may result in losses early on, but is intended to build brand loyalty for when it raises prices later.
References in periodicals archive ?
Students of business know this respectively as competitive pricing (on par with competitors), skimming pricing (higher) or penetration pricing (lower).
In the US, price skimming is the most frequently used strategy in the medical device market, but market segmentation should be used to assess if other strategies, such as penetration pricing, would be more apt in particular sectors.
They also find important roles for beliefs on both the demand side, as consumers tend to pick the product they expect to win the standards war, and on the supply side, as firms engage in penetration pricing to invest in growing their networks.
One good approach is penetration pricing, or pricing a product below cost to increase sales.
Within eighteen months the combination of penetration pricing, while remaining in operating and net profit, and a standardised advertising process had made Artprice the world's leading marketplace for works of art.
This increase in efficiency will be critical because companies will need to engage in penetration pricing to acquire a critical mass of customers.
For example, penetration pricing is one of the most utilized strategies; but managers often find that it fails to yield either the sales volume or profits that they expect.
The company believes the acquisition will provide a strategic opportunity in increasing gross sales margins and allow penetration pricing strategies in developing markets.