Penetrasjonsprising

Penetrasjonsprising, also known as penetration pricing, is a pricing strategy where a product or service is initially offered at a very low price, often below the cost of production, to attract customers and gain market share. The primary goal of this strategy is to penetrate the market quickly and establish a significant customer base. Once a substantial market share has been captured, the price is typically increased to more profitable levels.

This strategy is often employed by new businesses or startups entering a competitive market. By offering lower prices than established competitors, new entrants can attract price-sensitive customers and potentially convert them into long-term clients. Penetration pricing can also create barriers to entry for other potential competitors, as it makes it difficult for them to match the low prices and gain market share.

There are several factors to consider when implementing a penetration pricing strategy. Firstly, the business must have the financial resources to sustain the initial low prices, as profits may be minimal or non-existent during the penetration phase. Secondly, the strategy relies on the assumption that customers will remain loyal once prices are increased. If customers are primarily motivated by low prices, they may switch to other competitors once prices rise.

Penetration pricing can be effective in certain situations, but it also carries risks. It can lead to price wars, erode profit margins, and potentially devalue the brand if not managed carefully. Therefore, businesses should conduct thorough market research and carefully consider their long-term objectives before adopting this strategy.