![]() Then, marketers can focus on building customer loyalty rather than continuously fight for new audiences' attention. This is beneficial for companies because their products can penetrate the market quickly and build brand awareness for the business. Penetration pricing can be highly effective for some brands because it allows them to generate serious customer interest. Here are some key advantages of using this marketing technique: Increased customer interest When you know it how to use it effectively, penetration marketing strategy can help you market products and gain interest of new customers who'd potentially stay with the brand long-term. Related: Marketing mix pricing strategies: definitions and examples Benefits of using penetration pricing As a result, these customers are less likely to go to the competition because they can pay less for a product of the same quality. This makes the price appear more attractive to customers because they'd normally expect to see a more typical, higher price. When using this strategy, marketing teams agree to lower the price of a product for a fixed period after its launch. Using this strategy is common for campaigns that introduce a new product to an already competitive market. But, gradually the companies started decreasing the price, more and more competitors entered the market and now every segment can afford a smart tv.View more jobs on Indeed View more What's a penetration pricing strategy?Ī penetration pricing strategy, sometimes referred to as predatory pricing, is a marketing technique that consists in offering customers a lower price initially. When the first smart TV was launched, it was priced high and only a particular segment of the market was able to afford it. As a result, they disrupted the whole telecom industry in the country and currently enjoys the majority market share. When it was introduced in India, they sold their sim cards for free and didn’t even charge their customer a single rupee for more than a year. Whereas, if the market is sensitive enough penetration pricing will do its trick and compensate for low margins by higher sales volume. If the market isn’t sensitive enough to act on a lower price and purchase your product, penetration pricing doesn’t make sense. While a low price might mean a higher sales volume, you need to ask yourself if the market is sensitive enough to act on a lower price. How sensitive is the market when it comes to price?. ![]() But, if you are happy with a lesser market share but loyal customers who’re willing to pay you a higher margin that will generate high profit with a low volume of sales, go with a skimming pricing strategy. If your goal is to corner a market and want to enjoy being the leader in terms of market share, the penetration pricing strategy is the way to go.
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