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Pricing Strategy

5 Examples of Penetration Pricing

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Penetration pricing is the strategy of improving market share with a low price. It is associated with efforts to launch a new company, brand, product, service or technology. The following are illustrative examples of penetration pricing.


A small IT outsourcing firm enters the market and soon finds it is difficult to compete with large firms at standard industry prices. They cut prices out of a need to establish a customer base and reputation.


A large cosmetics and personal care products company is being challenged by smaller firms that offer all natural ingredients. They launch a new brand to compete in this market with products formulated to have clean labels with a handful of organic ingredients. They plan to enter the market aggressively with lower prices than the competition for a few months.


A beverage company launches a brewed tea in a bottle that is nothing but green tea. It is launched into a market that is almost completely dominated by sweetened beverages and bottled water. The marketing team has reason to believe that the idea may strongly appeal to certain consumers. They launch at a low price in an attempt to achieve product diffusion.


A streaming media service intends to challenge cable TV for dominance of the home entertainment market. They initially set prices far below cable TV to capture market share.


A manufacturer uses new materials and methods to create a lighter, high performance snowboard. They initially find that there is little interest in the technology amongst snowboard brands. In order to get the technology out the door, they settle for a low price non-exclusive contract with a major brand. The firm is confident that the technology will catch on once people use it.
Overview: Penetration Pricing
Capturing initial market share with a low price.
Related Concepts


This is the complete list of articles we have written about pricing.
Algorithmic Pricing
Bargaining Power
Benchmark Price
Price Fixing
Cost-plus Pricing
Price Gouging
Customary Pricing
Decoy Effect
Everyday Low Price
Marginal Utility
Willingness To Pay
Dynamic Pricing
High-Low Pricing
Market Value
Flat Pricing
Loss Leader
Predatory Pricing
Price Discrimination
Snob Effect
Market Price
Price Competition
Price Leadership
Premium Pricing
Price Economics
Price War
Revenue Management
Veblen Goods
Price Floor
Price Promotion
Price Sensitivity
Price Skimming
Price Umbrella
Pricing Power
Pricing Strategy
Sticky Prices
Value For Money
More ...
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