Penetration strategies are frequently used by companies that need to exhaust their spare resources. The management dictionary covers over 7000 business concepts from 6 categories. In addition, firms will normally only use price penetration for non-durable products, such as ‘fast moving consumer goods’ (fmcgs) sold in high volumes. You can follow me on. If the initial price is set low, at $2, for instance, the quantity demanded will be high: 400 units. When you lower prices, the sales volume increases and market share too may increase. Brands that are perceived as “cheap” may have trouble competing with higher-priced competition.
Market penetration pricing. And efficiency can dictate whether they can be successful or not as the focus should be on minimizing unit costs right from the start. In your customers? the penetration pricing might attract the wrong kind of customers, who are more interested in the cheap price focusing on the bargain, rather than the ones who will become loyal to your brand. And we’re trying to make sure that they can get a good quality product at a price that’s comparable to the non-organic brands and in some cases actually the same price. Interestingly many businesses focus on either building their price structure by using costs as the basis or by using market information (that is, what the market will pay). She is also a state legislator and associate professor. For example, customers can buy many of the same groceries from. Is appropriate for new products into a market – those at the introductory stage of its life cycle.
The price is deliberately pitched at a low level to build demand and to capture market share from existing products. We can generally provide a better savings [on organics] than others because other retailers sometimes will use it as an ability to get more margins and so we show greater savings [through lower prices]. A penetration pricing strategy creates a significant advantage for a firm that can identify and act on this type of price sensitivity.