Marking strategy: penetration pricing.

[Mataracy]

Penetration pricing is the practice of pricing at a relatively low level initially in order to achieve a relatively high sales volume and in effect penetrate the market to a greater degree than could be achieved with a higher price. Such a pricing policy is most appropriate for a firm that wants to maximize sales in the short-run or deter the entry of new firms.

Under conditions where entry of new competition is relatively easy in terms of capital,technology and manpower, we would expect penetration pricing strategies, since this would make the product appear much less profitable,if at all profitable for new firms that want to enter.

The conditions that most favourable to penetration are:
High short- run price elasticities with lower long -run elasticities; Economies of scale in production;
the threat of new substitutes which may require restraint in profit making to discourage entry,this is known as stay-out -pricing; and
A favourable impact of sales of the product under consideration on the sales of other company products and on customer goodwill.

In the selection of a skimming price or a penetration price one should consider the difficulties that potential competitors are likely to have copying the new product after they achieve entry .

If the degree of differentiability is low,the initial firm may wish to use penetration pricing in order to establish a broad market base and build goodwill and consumer loyalty for future sales.

So therefore ,penetration pricing is suggested when the nature of the product is such that it will generate a continuing stream of complementary sales.

 

[Augusta]

It is always good to use a price strategy albeit a low one when trying to sell new products. The essence is for you to capture the market and lure more people to the product. When once the product is wholly accepted then the can be price increase intermittently for more profit

 

[Deleted member 28127]

It is always good to use a price strategy albeit a low one when trying to sell new products. The essence is for you to capture the market and lure more people to the product. When once the product is wholly accepted then the can be price increase intermittently for more profit

Lure more people to product is the most hardest point because lure people to product is a study at university called marketing that cannot be easily done by everyone there is specialists that plays in psychology of people to convince them you need to hire them. Additonnally it can be possible that product is wholly accepted however you have to take care about concurrent tricks that can have more promotion than you and grab more sales.

 

[linneasandel]

You come up with an excellent post. One of the best marketing strategy is distribution. You can handout your brand imprinted promotional products to the target audience and win their heart. This will help you to market your business and spread a good brand visibility.

 

[Setho]

This is actually a very good business strategy especially for awareness but it is one that you have to be very careful because if you do not fix the price well or you reduce it too early a lot of people are going to go back to the ways in which they have been buying before..