Penetration price strategy example4/21/2024 ![]() ![]() Doing so, they manage to keep their prices low and keep their customers. Companies often use this strategy combined with a low-cost structure, meaning they reduce costs to maximize margins. When setting a low price as part of an introductory campaign, companies may find customers switch to competitors once the price is raised. However, penetration pricing may continue to see limited profits because the company doesn't target customers willing to pay high prices. Finally, when the demand increases, you can set the price higher. Profits are lower in the short term, but the high number of early sales compensates for the small margins. With this method, you enter the market rapidly and grow a loyal client base. Penetration pricing is a strategy where prices are set low to attract new customers and increase the product’s market share. Related: How To Set a Pricing Strategy Framework What is penetration pricing? Therefore, a high-quality product is essential to maintain your value-oriented customers' interest. Skimming leaves an opportunity for competitors to undercut your prices and try to attract your customers. The price is then steadily reduced over time to attract other customers. You make fewer sales at first, but they are more profitable. Price skimming is an effective pricing strategy when companies target customers that are already interested in their products The strategy is to set your prices high in the beginning to maximize short-term profits. ![]()
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