PRICING is one of the

most important parts of

Marketing Management.
Marketing manager who can
manage price and pricing of the
product is the one who is
successful.
PENETRATION
PRICING
We want to penetrate into
market by virtue of Pricing.
 BRAND LOYALTY

If the product is not available in the

market, customer will not buy any
other product but he will wait for that
particular product.
Penetration Pricing is the Pricing
technique of setting a relatively
low initial entry price, a price that
is often lower than the eventual
market price.
 PENETRATION
PRICING
a) To break Brand loyalties

b) To attain immediate gains

(Sales Volume)

c) To capture large market

PRICING is a tool in the
hands of Marketing
managers
PRICING tool must be
used effectively to get
maximum benefit.
 ADVANTAGES OF
PENETRATION PRICING
 ADVANTAGES OF
PENETRATION PRICING

• It can result in fast diffusion and

adoption. This can achieve high market
penetration rates quickly. This can take
the competition by surprise, not giving
them time to react.
Inherent enthusiasm must be
cultivated.
PRICING is an indicative
of quality of the product
and its positioning.
 ADVANTAGES OF
PENETRATION PRICING

• It can create goodwill among the all-

important early adopter segment. This
can create valuable word of mouth .
 The most important factor is
“ Who decides to buy an item”?
 ADVANTAGES OF PENETRATION
PRICING

• Penetration Pricing infact generates

large volume.....economies of Scale. It
can create high stock turnover
throughout the distribution channel.
This can create critically important
enthusiasm and support in the channel.
 ADVANTAGES OF
PENETRATION PRICING

• It creates cost control and cost

reduction pressures from the start,
leading to greater efficiency.
Lesser the Volume, greater
will be the cost.
 ADVANTAGES OF
PENETRATION PRICING

• It discourages the entry of

competitors. Low prices act
as a barrier to entry
ADVANTAGES OF PENETRATION
PRICING

• Important Enthusiasm
 Generating enthusiasm is an
important activity in Marketing.
PENETRATION PRICING must
be handled very carefully.
 DISADVANTAGE OF
PENETRATION PRICING
 DISADVANTAGE OF
PENETRATION PRICING

a. We are maintaining penetration

price out of our own profit
margins.
 DISADVANTAGE OF
PENETRATION PRICING

b. Concept of Product is based on

Prising. It establishes long term price
expectations for the product, and
image preconceptions for the brand
and company. This makes it difficult
to eventually raise prices.
 DISADVANTAGE OF
PENETRATION PRICING

c. Penetration pricing attracts only the

switchers (bargain hunters), and that
they will switch away from you as
soon as you increase prices.
 DISADVANTAGE OF
PENETRATION PRICING

d. There is much controversy over

whether it is better to raise prices
gradually of a period of years (so that
consumers don’t notice), or employ a
single large price increase (which is
more efficient).
• We should use Penetration
pricing but we should use it
very carefully.

• Before we use Penetration

pricing we must analyze the
conditions under which it is to
use.
• Price Penetration is most
Appropriate When :
1) Product demand is highly price
elastic.
2) Substantial economies of scale
are available.
TWO ASPECTS OF COST

• Total Fixed Cost (TFC)

• Total Variable Cost (TVC)
FC+VC=TC
HOW TO IMPLEMENT
PENETRATION PRICE?
A common solution to the price
expectations problem is to set the
initial price at the long term
market price, but include an initial
discount coupon. In this way, the
perceived price points remain
high even though the actual
selling price is low.
LOSS LEADER
In marketing, a loss leader is an
item that is sold below cost in an
effort to stimulate other profitable
sales. It is a kind of sales
promotion. There are several
varieties of this profitable
technique.
Sales of other items in the
same visit
One use of a loss leader is to
draw customers into a store
where they are likely to buy
other goods.
PRICING is used as a
tool by Marketing
managers to increase
and augment the sales.