The more market share you own, the more of a market leader you become. If your product is high-quality and launched efficiently, you'll attract customers away from your competitors. The method is effective for entering new markets with little difference between products, like kitchen appliances or internet service providers. The theory behind market penetration pricing is that a low initial price secures market acceptance and forms customer habits. You can raise the price as demand increases. In the short term, profit margins are lower, but heavy sales volumes compensate for the small margins. With penetration pricing, new products are sold at low prices to build a customer base. The goal is to aggressively get customers in the door with low prices and gain market share. Penetration Pricing StrategyĪs we've mentioned before, the penetration pricing strategy involves offering a new product or service at a low initial price to gain customers' attention. Many high-profile startups have used this strategy to disrupt industries and become today’s market leaders. By entering the market with a low price, businesses aim to attract customers quickly-then gradually raise their price. A penetration pricing strategy is built on this concept. New businesses rely on clear and powerful differentiators to stand out from the competition.

For many consumers, nothing makes their buying decision easier than price. 4 min read Photo by Markus Spiske / Unsplash.

Penetration pricing is