Penetration Pricing And Other Pricing Strategies

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Penetration pricing is usually the method that is used when a business introduces a new product. This technique allows a business to introduce a product at a lower price point in hopes of attracting new customers. This is a good strategy for business owners to use if they are hoping to coax customers away from a more expensive brand. Typically, penetration pricing is a long-term marketing objective.

Price skimming, on the other hand, when a business owner introduces their new product at a higher price point. This method is also known as riding down the demand curve, and allows a business to quickly recover costs. After the initial capture of customers, the business can then lower its price point to attract a different segment.

When business introduces a new product into a market where similar products already exist it known as market penetration. This process is important for business to consider when determining their pricing strategy. Knowing how many competitive products are in your market segment can assist businesses in pricing their products competitively.

Product development also depends heavily on being aware of existing products in the market segment. Setting a product apart through sophisticated development will ensure a product doesn’t sit on the shelf in a saturated market.

When a product is unique or original to the market, businesses have the luxury of pricing higher. This is called premium pricing. Unlike price skimming, prices stay high even over time.

Essentially, the opposite of this strategy is economy pricing, or pricing products cheaply. Even promotional costs are kept low when using this pricing strategy so the business can offer the lowest possible price for the product. This is also considered a good strategy to use when reintroducing a product to the market.

Knowing the wide variety of pricing strategies available can help a business implement a proper pricing structure for your new product. Remember, if you price it right, they will come.