Penetration Pricing

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Penetration Pricing or Market Share Pricing is a pricing strategy intended to gain as much market share as possible when introducing a new product by entering the market with a relatively low price and targeting a broader market segment. In this approach, the price of a product is initially set low in an effort to penetrate the market quickly, since potential customers are enthused to switch brands because of the lower price. The price might be raised later once enough market share is gained. Low prices and low margins also act as a deterrent or entry barrier, preventing potential rivals from entering the market since they would have to undercut the low margins to gain a foothold. Penetration Pricing is the opposite of Skimming.

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