Penetration pricing | Advantages | Disadvantages

Advantages and Disadvantages of Penetration Pricing

Image: Advantages and Disadvantages of Penetration Pricing

Penetration pricing stimulates the market growth and capture market share by deliberately offering products at low prices. This aims at maximizing profits through effecting maximum sales with a low margin of profit. It is used as a competitive weapon to gain market position.

Advantages of penetration pricing

The advantages of penetration pricing are given below:

1. It helps the marketer capture the market by quick sales.

2. Brand loyalty is built by creating mass demand for the product sold at a lower price.

3. Due to large scale production, substantial economies can be enjoyed.

4. It is used to acquire and hold a share of market in a competitive environment.

5. It discourages the new entrants to the export market. Companies that are new to exporting cannot absorb losses arising out of penetrative price. Thus, potential competition is kept away.

6. By creating a mass market for the product, the company can establish itself as a brand leader. So, customer will not object even to a slight price rise later.

Disadvantages of penetration pricing

1. Low price may not yield sufficient profit to cover up development expenses in short run.

2. If quick sales do not take place, funds will be locked up unnecessarily.

3. The price and quality relationships may bear adverse implications. A lower price may be related to low quality of the product.

4. Once a low price is quoted, it is difficult to rise it later.

5. If the product has a short life cycle and goes out of date within a short period, the loss suffered by the marketer will be huge.

Leave a Reply

Recent Posts




Comments


Related pages


define merchant bankingessential elements required for the formation of a valid contractmanagerial accounting vs cost accountingproject report on venture capital financing in indiacalculating turnover ratiocaveat venditor meansdebtors turnover ratio definitioncharacteristics of zero based budgetingdisadvantage of stratified samplingobjective of rural bankingproduct margin traditional costing systemwhat are leverage ratiospros and cons of market segmentationintroduction of sole proprietorshipcapitalized expenditurepropaganda vs advertisingmeaning of duty drawbackformula for quick ratio in accountingdefensive interval ratiocentralization and decentralization of authorityincome tax evasion indiavalid contract caseshow to file alphanumericallychit fund listadversementtypes of securities pptsales aid definitionsidbi inco-principal debtormode of operandi meaningbill of exchange promissory noteprofitability ratio interpretationturnaround ratiomanagement accounting marginal costingregister of debenturesdisadvantages of break even analysisvalued policy in marine insuranceadvantages and disadvantages of world bankhow to calculate quick ratioeffect of deficit financing on economysales forecasting meaningdemerits meaning in hindiaccounting inventory turnover ratioprobability and nonprobability sampling pdfresponsibilities of managerial economicsdisadvantages of computerized accounting systemnegotiable instruments in business lawinductive method advantagesleverage ratios formuladefine impersonableexamples of judgement samplingco op bank loansmarketing observational researchvouching forbearer debenturesindian caste hierarchymaterial price variance formulaadvantages of process costingdifference between verification and valuationdefinition of retailing in marketingcorporate veil protectiondisadvantages of departmentalizationmeaning of gattnationalization advantages and disadvantageshow to train sales peoplewhat is the best forecasting methodmarket economy advantages and disadvantagescoop dividendprobability and nonprobability samplingadvantages and disadvantages of break evendifference between a bond and a debenturedifference between equity and debt markettripartite agreement indiafootwear market segmentationwhat are disadvantages of capitalismsebi guidelines for ipoventure capitalist define