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. The customer might leave your brand altogether, if another competitor is consistently offering the same quality of product at lower prices.Īlso Read What is Marketing Mix Modeling? Comprehensive Guide on How MMM Works 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.

Price penetration example