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Penetration Pricing

Penetration pricing is the strategy of pricing a newly launched product or service at a low initial price to gain the attention of shoppers.

A pricing strategy  to launch a product or a service at a low initial price to capture market share and then gradually increase prices is called the Penetration Pricing.

This means enabling a very low initial price on a product in the short term, with the aim of compensating in the longer term by upselling or cross-selling the new buyers you gain.

Sometimes, a business with a new offering may use penetration pricing to gain a huge market share of customers before any strong competitors come into the area. Then, they may raise their prices once they’ve established the market penetration they are after.

Published
May 10, 2024
Updated
November 8, 2024

Frequently Asked Questions

In short, penetration pricing can increase your sales number and market share, lower costs mean lower profit margins. There is also a risk that buyers will return to a competing store once you raise prices. Retaining consumers in your online store is the key to a successful penetration pricing strategy.

The thought is to offer a low upfront price to pull potential buyers away from the competition, giving up short-term offers for long-term growth.

Penetration pricing is the best way to get the attraction to a new product. You'll gain market share and attract new buyers, but remember, it's temporary. The aim is to enable you as a main player in the market as prices gradually rise.