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 ?
Top players are consolidating their market position by implementing strategies such as innovative product development, customer centricity, continuous technological development, expansion of product distribution channels, and penetration pricing to maximise sales and increase profitability.
Students of business know this respectively as competitive pricing (on par with competitors), skimming pricing (higher) or penetration pricing (lower).
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.
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.