Netflix is the perfect example of penetration pricing done right. Follow one of these penetration pricing strategies and you’ll be investing in long-term profit, even if you carry a short-term loss. Here are five examples of penetration pricing strategies being put to work. The expectation with a penetration pricing strategy is that you’ll create brand loyalty and get customers to love your product, increasing their willingness to spend more down the road. Businesses use this strategy to attract customers to a new product or service to win market share. Penetration pricing introduces customers to a new product at a steep discount, and often at a loss to the merchant. That’s where penetration pricing comes in. Retailers need to think outside the box to make waves in the market to catch the attention of potential customers and convert them into loyal consumers. The barriers to entry in a retail market are very high both due to the heavy competition and demanding consumer base. This is an efficient way to create a Point of Differentiation (POD) from your competitors, especially in the Fast Moving Consumer Goods (FMCG).In a market heavily driven by consumer trust and brand loyalty, many consumers are reluctant to switch brands or try new products. Gillette makes up for the damage done by lost income by selling razor blades, attachments, and accessories at a higher price. Gillette: When it comes to an excellent penetration price plan, one name that comes to mind is Gillette.As a result, when Disney+ chose to create its streaming platform at the end of 2019, penetration price was the best option. Netflix and Hulu, for example, have strong brand recognition and a committed consumer base. Disney+: One of the most challenging markets for new businesses to get into is streaming entertainment.That’s less than a dollar per DVD, compared to $4.99 for a three-day rental period at Blockbuster. Netflix began offering a $15.95 four-DVD rental subscription in 1999. Netflix entered a market that was dominated by DVD rentals. Netflix is an excellent example of a company that has successfully implemented the penetration pricing approach.Some of the examples of a successful penetration pricing strategy are: Without a strong acquisition strategy, it isn’t easy to get a foothold in a new market due to the competitive nature of these items and the vast amount of options available to most consumers. Penetration pricing is a popular strategy in the business-to-consumer (B2C) market. Examples Of A Penetration Pricing Strategy If your company’s brand identity is critical to its success, penetration pricing may not be the best option because purchasers may see your brand as “cheap” or “low-quality.” If you have loyal customers, you may have more success with penetration pricing because they will continue to buy whether you upsell or raise your prices. When companies consider implementing a penetration pricing strategy, they should evaluate their customers’ thoughts on the importance of brand recognition and loyalty. There are various aspects to consider when it comes to penetration price. People may grow dissatisfied with rising costs and stop buying the product or service or switch to a lower-cost competitor who offers a better deal. If a company uses penetration pricing to acquire new consumers, people may expect consistently low prices for a product or service.Companies can also get a significant part of the market before competitors react to their pricing strategy.As a result, any corporation should avoid using penetration pricing as a long-term pricing strategy. Customer contentment cannot be assured, and in some situations, customers may continue to be a financial drain.The rapid influx of new customers who see the product’s value and believe they are getting a good deal.There are various benefits to using penetration pricing, but some substantial potential negatives to consider. Pros And Cons Of Using A Penetration Pricing Strategy The aim is that the higher sales volume will compensate for the lower cost. Following a time of expansion, the company often raises prices to boost profits and reflect the increased value of the product. Customers of competitors may migrate to the cheaper offer, and new customers may join as well. The low initial price forces competitors to match the offer or quickly implement different techniques. It is the practice of setting a low initial price for a product to make up for it in the long run by upselling or cross-selling to newly gained customers.īusinesses use penetration pricing to introduce a low price for a new product or service. The penetration pricing strategy, often known as the “land and grow” method, is a pricing strategy used by businesses (especially in the SaaS industry) to penetrate or infiltrate new markets or rapidly expand in existing markets by charging higher prices. Definition Of A Penetration Pricing Strategy
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