With pricing penetration, companies advertise new products at low prices, with modest or nonexistent margins. If the competition also lowers their prices, the companies might find themselves in a price war, leading to lower prices and lower profits for an extended period of time. However, if the low price is part of an introductory campaign, curiosity may prompt customers to choose the brand initially, but once the price begins to rise to or near the price levels of the competing brand, they may switch back to the competitor.Īs a result, a major disadvantage to a market penetration pricing strategy is that an increase in sales volume may not lead to an increase in profits if prices must remain low to keep the new customers. Once a purchase has been made ideally, an email or contact list is created to follow-up and offer additional products or services to the new customers at a later date. However, the key to a successful campaign is keeping the newly-acquired customers.įor example, a company might advertise a buy-one-get-one-free (BOGO) campaign to attract customers to a store or website. Additionally, a higher amount of sales can lead to lower production costs and quick inventory turnover. It can often increase both market share and sales volume.

Penetration pricing, similar to loss leader pricing, can be a successful marketing strategy when applied correctly.

Disadvantage of penetration pricing