![]() Better goodwill: Customers will pledge their loyalty to products or services that offer them a benefit or bargain in terms of price and quality.Economies of Scale: Pricing strategy helps to increase sales which lets a firm or business to gain economies of scale and reduce its fringe cost.The company implementing the strategy gets the opportunity to gain new customers. Dominance in the market place: Competitors are caught by surprise when a penetration pricing strategy is implemented and do not have enough time to counter.Greater adoption and dispersion: Penetrating pricing helps a company to sell its product or service quickly and get it widely accepted and adopted by debutant customers.Penetration pricing can have a lot of advantages to businesses looking to enter a new market or trying to introduce a new product or service. Penetration pricing will work effectively only if the quality of the product or service matches the customer expectations and demands. If the customer finds the product to their satisfaction, they will not think twice to pay a higher price for the product. ![]() Lower prices raise curiosity levels of customers and prompt them to buy the product. It will then raise the price after gaining a monopoly over the market to gain a higher profit margin. If the average cost of soap in the market is $10, company A decides to sell at a lower cost by enticing customers, achieve economies of scale, and get customers to switch. It decides to enter the market and sell soap at $5 where the cost of production is $5.50. If an FMCG company A is able to manufacture soaps at a lower cost because of excess production capacity. The below-market penetration pricing example will help to understand the concept of penetration pricing in a wider manner. A few examples are an online grocery store offering a free delivery service for customers who sign up, banks offering a saving’s bank account at zero balance for six months. To understand penetrating pricing meaning, the following penetration pricing examples will be of good help. Mass markets let to have a wider customer base thereby creating economies of scale.
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