![]() You get up to 54 days to clear your Card balance, so you can keep your money in the account while your product gains traction and sales build.¹ Goals and advantages of penetration pricing ![]() ![]() When you're trying to gain competitive advantage with lower pricing but still have to pay for supplies, an American Express® Business Gold Card can help you to maintain good cash flow. “Once we started to gain a reputation as being the best-in-market, we started to push prices higher," says Brown, "as our prices shifted upwards to better reflect the labour involved, we further established our position as the premium brand for the product range, and we sold more. The downside of this strategy was that profit margin was compressed Pampeano was paying for expensive raw materials, a skilled production workforce, expensive packaging, and the option to personalise, but this wasn't reflected in the initial pricing. I feel confident about pursuing penetration pricing at the moment in the EU and the US because of this earlier success," she says. "When the brand was less well known in the UK, our price was similar to that of competitors, but the quality was better. “Penetration pricing works very well for us,” says Jennifer Brown, managing director of leather accessories company Pampeano, which used penetration pricing to enter the UK market around eight years ago but now retails here at full price. “Set it too high or too low, and you stand to lose your market share and sales.” Example of penetration pricing "A mass-market product with already stiff competition means you can take a clue from your competition to find that sweet balance," says Brian David Crane, founder of digital marketing fund Spread Great Ideas. The way you price your product also contributes to its perceived value within the competitive landscape. Pricing your product can be a tricky balancing act between what consumers are willing to pay for your product or service, and what works best for your business. Why is pricing strategy important to product management? In this article, we explore the advantages of penetration pricing (as well as its disadvantages) and offer insight into when and how to make this strategy work for you. There are many approaches, and choosing the right strategy depends on a number of factors, including market conditions, competitive landscape, and the maturity of your product or service. Both can make it difficult to raise prices later. Another potential disadvantage is that the low profit margins may not be sustainable long enough for the strategy to be effective.Getting your pricing strategy right is one of the most important parts of running a good business. The main disadvantage of penetration pricing is that it establishes long-term price expectations for the product and image preconceptions for the brand and company. It can generate high stock turnover throughout the distribution channel, which creates important enthusiasm and support in the channel.It discourages the entry of competitors.It establishes cost-control and cost-reduction pressures from the start, leading to greater efficiency.It can create goodwill among the Innovators and Early Adopters, which can generate more demand via word of mouth.The strategy can achieve high market penetration rates quickly, taking competitors by surprise and not giving them time to react. It can result in fast diffusion and adoption across the product life cycle.The advantages of penetration pricing to the firm are the following: Like skim pricing, penetration pricing shows an awareness of the dynamics in the product life cycle. Why Might Penetration Pricing Make Sense? Penetration pricing offers a lower price in order to draw in a higher demand from consumers.
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