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penetration pricing

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penetration pricing

Pricing strategy whereby a firm initially sets a low price in order to gain a market share in a mature market by persuading customers to try the product. Penetration pricing is also often adopted when a firm launching a new product expects its competitors to launch similar products. It can then build up market leadership by being first in the market.



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Price skimming and penetration pricing reflect the two polar pricing strategies for an organization.
One good approach is penetration pricing, or pricing a product below cost to increase sales.
This increase in efficiency will be critical because companies will need to engage in penetration pricing to acquire a critical mass of customers.
 
 
 
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