Penetration Pricing Strategy

In marketing, many strategies can be applied to increase sales. One of them is the penetration pricing strategy which is believed to be able to bring many benefits and benefits in the marketing strategy. It’s just that there are still many who don’t understand this interesting strategy. So it is necessary to get more information about it.

The article below will discuss penetration pricing strategy, especially related to marketing activities. Starting from the definition information, its benefits, and to what the disadvantages of its application. Furthermore, see the following explanation.

About Penetration Pricing Strategy

The first is related to the definition or understanding of penetration pricing strategy. As one of the marketing techniques that are starting to be widely used, penetration pricing strategy is a marketing method to attract new customers. You can implement a strategy of building loyal customers for your brand.

Every business that offers products and services to customers must decide how to make its offerings available to customers. Especially when there are already active competitors who offer something similar. There must be a specific marketing strategy chosen by company managers and executives to use to reach customers quickly. One of them is this one strategy.

This strategy is a marketing strategy that focuses on reducing the cost of a new product or service in the market to attract customers to buy it. These lower costs can entice customers to take steps to purchase products or services versus products that may have entered the market at a more general price. It is important because it allows companies to acquire sales or loyalty of new customers who may have gone to the competition instead.

Advantages and Disadvantages of Penetration Pricing Strategy

The Advantages of Penetration Pricing Strategy

Using penetration pricing strategies in marketing techniques certainly brings many benefits. This is therefore a strategy worth considering. Some of the benefits that can be obtained from this strategy are the following.

Keeping The Customers

Keep buyers as loyal customers even when the price of a product or service rises after the initial offer. In business, the thing that is quite important to take care of is the customer. Therefore, the strategy of retaining customers is a marketing strategy that never fails in ensuring business continuity.

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Controlling Costs Within the Company

The establishment of a penetration pricing strategy helps create cost control within the company. As we know that in a company, of course, quite high operational costs are needed. So it takes the best way to do it efficiently. One of them is by way of a cost penetration strategy, which means there has been greater efficiency since the first launch of a product or service.

Helping to Introduce New Products

If the company is working on introducing a new product, using a penetration pricing strategy can help you build your product and gain loyal customers. This is one of the best marketing strategies to make many customers know that there is a new product launched. Therefore, it is not surprising that this strategy is a mainstay strategy to attract customers through innovations that appear in a product.

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Generating Positive Branding

A penetration pricing strategy can help you develop a positive brand with your customers. Offering products at a lower price can make customers see the company with a positive outlook. Therefore, when you want to ensure that the product gets a positive response, this is one of the strategies that can be chosen to do.

Disadvantages of Penetration Pricing Strategy

Of course, there are also disadvantages of implementing a penetration pricing strategy in a business. So business people must pay attention to what are the potential disadvantages of choosing this marketing strategy. Some of the shortcomings that can be the disadvantages of the strategy are as follows.

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Customers Will Leave When the Price Go Up

If customers don’t recognize the significant difference between your product and a competitor’s product, they can switch back after you raise the price of your product. To avoid this, find and focus on one aspect of your product that is better than a competitor’s product, and show your customers why they should keep buying your product for that reason.

Not Suitable for Small Businesses

Because a penetration pricing strategy requires you to reduce or eliminate your profits for some time, it is not easily adopted by small businesses without the resources to support the strategy. Consider implementing a penetration pricing strategy for a shorter period or requesting a business loan to cover costs.

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May Result Price Competition

If you lower the price, competitors can also lower the price. If this starts a cycle of companies lowering their prices, it can lead to low profits or become a challenge to manage your company. You can avoid price competition by assessing your competitors and determining how they might respond before implementing a penetration pricing strategy.

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Penetration pricing strategy can indeed be one of the attractive marketing strategies to implement. Many benefits can be obtained from this strategy. But be careful and don’t get it wrong in stepping. Because as stated above, there are some disadvantages and drawbacks of this strategy. Therefore, companies must remain vigilant and wise when deciding to take a marketing strategy.