#Price penetration strategy how to

The goal is to attract a large number of customers and establish the product or service as the preferred choice in the market.Ī market penetration pricing strategy is often employed when an organization enters a new market or introduces a new product where competition is already intense. Penetration pricing is a marketing strategy whereby an organization sets a low price for its product or service to rapidly gain a significant market share. Despite some differences in taste and design as well as target market, as Mokai is generally targeting the female sector compared to Savanah which is targeting both genders, Mokai had to come up with a strategy to capture consumers of Savanah.Penetration Pricing Strategy What is Penetration Pricing Strategy? As the Tanzanian alcohol market can be described as quiet mature, one of the most powerful ciders on the market being Savanah. As part of the market research and strategy, they have been analyzing their competitors and what kind of ciders can already be found on the market. Top Danish cider brand Mokai has been trying to approach the East African market with initial focus on Tanzania. Case study for Penetration pricing with example of brand Mokai – A cider brand Not every brand with penetration pricing succeeds, but not every brand fails with it. Thus, we can see that penetration pricing has its own success and failure ratio. When you have an offer on an international tour, when you get huge discounts on calling rates, or when the airlines turn cheap for a month, you will see the maximum sales happening. Some industries like telecom, airlines, tourism etc are the best examples of industries where competition is very high and penetrative pricing works miracles. However, even though the company might have to stay on it toes to apply the penetration strategy, if the strategy is applied correctly, it can be a very successful marketing strategy. Thus, the customer who is price sensitive will keep switching to cheaper brands where he gets more value for the same money or same value for lesser money.

And now Micromax is facing competition from other brands which are penetrating the market. But Samsung’s market share was taken away by Micromax which used penetration strategy. After that, Apple remained at Skimming price due to its brand building efforts. Later on, Samsung entered the market with penetration pricing, taking away the smart phone market from Apple. Apple came in the market with an astounding operating system and took away the market with skimming price. Take the example of the Smart phone market.

#Price penetration strategy how to

The customer might leave your brand altogether, if another competitor is consistently offering the same quality of product at lower prices.Īlso Read 7 Steps of Sales Process And How to Create One? Penetration pricing in the Smartphone market Thus, if you are not able to meet margins, and if you increase prices, the customer might switch again. The low initial price has created an expectation of permanently low prices amongst consumers. Then, after one month, the prices rise, more or less equivalent with the others. According to your budget, you will probably chose the cheapest one. This is an inherent nature of the penetration strategy, where you yourself are breaking the customer from another brand and attracting him to your brand.Ĭonsider having 10 kinds of cheese, very similar in quality. Even though they might consider a similar strategy as yours, once you approach the market through a penetration pricing strategy, only the product’s profitability and efficiency can dictate whether they can be successful or not as the focus should be on minimizing unit costs right from the start.Ī drawback of price penetration depends on the kind of customers you are targeting and whether you are looking for brand loyalty in your customers? The penetration pricing might attract the wrong kind of customers, who are more interested in the cheap price focusing on the bargain, rather than the ones who will become loyal to your brand. By setting lower prices than your competitors you also create barriers for the new entrants into the market. When you lower prices, the sales volume increases and market share too may increase.

From the marketing objectives point of view, the strategy can lead to very interesting results if we were to look at the increase in market share and sales volumes due to use of penetrative pricing.