11 Market Penetration Pricing Strategies

With a flat economy and growth being achieved in many upper income classes, but not anywhere else, having a good market penetration pricing strategy is important for any business to find success. With the right price points, you can develop a high volume of sales quickly and get the brand recognition your business needs to develop other goods and services to enhance revenue streams. The wrong pricing strategy, however, can sink a product fast.

It all begins with a product that carries some level of genuine value beyond just perception. A product cannot penetrate deeply unless it is able to provide value to a wide array of market segments in a very effective way. It must be better than the competition, but it must also have a value ratio that is better than the competition. Being a cheap product isn’t good enough. You must provide the most value when price and usability are combined.

Market Penetration Pricing Strategy Ideas

1. Discourage the Competition
The lowest price you can possibly set and still make money is usually the right place to begin. You want to have your new products priced in such a way that your competitors can’t just copy the product and sell it for an even lower price! The lower the price you can set upon the introduction of the product, the more discouraged others will be to copy it.

2. Marginalize the Industry
Any good market penetration pricing strategy must include a secure distribution and production schedule so that you can meet demands. A good pricing strategy does nothing when there aren’t any products around to be sold! Although some products will have consumers waiting for them to be released in limited quantities, the average small business owner in the average community doesn’t have this luxury. Secure your supply first, then plan to meet the demand.

3. Create Goodwill
Customers today want something that is of a good quality for a fair price. When you can leverage a good price point that keeps the competition away, yet still provides you with a comfortable profit margin because you’re producing items in bulk for a low per-unit price, you’re going to have the best strategy there is to make money in this method.

4. Beware of the Shortfalls
You must plan out your marketing strategy completely beforehand because you will be taking on a lot of risk. With a low price point, you’re going to need a lot of inventory and sales to make up the difference so profits can be had. If sales aren’t as strong as expected, then you could be stuck with a lot of inventory and extra costs that were unanticipated. Atari once dumped 3 million video games into a landfill because it was cheaper to eat the production costs than try to sell a bad game. Think about the loss they took on that!

5. Prepare For a Price War
There’s always a risk that your competition will follow suit and create their own market penetrating price points to drive down costs. People are willing to spend more to get a premium product, but what they don’t want to do is to purchase something that is cheap or perceived as cheap. Part of your strategy must include what to do if your competition follows suit so that you have a way to differentiate from them. What makes you strong? What makes them weak? Put those points of emphasis into your pricing strategy.

6. Create Positive Branding
Pricing strategies are always about the value ratio. If you can provide a positive value ratio to your consumers, then you’ll be able to create positive branding – even if your competition tries to innovate a new product or drive prices even lower.

7. You Need Price Elasticity
This particular strategy will only work if the demand for more quantity increases more than the price decreases. This is called elasticity because revenues are found in the lower prices. If the demand isn’t there, then you’ll lose your business if you attempt this marketing strategy for your next product. Check to see what people are wanting before you even begin producing to shore up this end of your marketing strategy.

8. Absorb the Loss
If you’re slashing prices, you must be able to absorb the loss that you’re taking in some other way. It’s nice to purchase a shirt that’s 90% off, right? The reason why stores do this is because the average consumer will then purchase another product, often a premium product, because of the convenience of a good value at a low price. People feel guilty when they get a good, low price and so they make up for it by spending more than they intend.

9. Hook Them and Bait Them
You can undercut the competition by offering a low price now, but a higher price later. The perception of a lower price now overrides the understanding that there will be a higher price later on. Sometimes customers think they can scheme out of this and that works to your advantages as well. The goal is simple: get used to the service so you won’t switch when the prices are higher.

10. Another Hook and Bait
Sometimes you can sell the main product you produce for an outstanding low price, but then sell the needed complimentary items at an inflated price. This encourages a larger market share and then the money is made based on the sales of the complimentary products that work with the lower priced product.

11. Get Good Words
With good values at low prices, people will quickly spread the word about the awesome deal you’re providing. The danger is that if your product is seen as cheap or worthless, you’ll end up with a lot of negative reviews. Make sure you’ve got enough capital to survive until you can increase your prices and you’ll have a good strategy that will develop loyalty to you and keep customers away from your competition.

Pricing Strategy and Tips