Market Penetration Pricing: Pros and Cons Analysis PPT
This PPT slide, part of the 23-slide Price War Strategy PowerPoint presentation, presents a comparison of skimming versus penetration pricing strategies, focusing on the advantages and disadvantages of penetration pricing as a means to quickly capture market share. The central theme emphasizes the urgency of penetrating the mainstream market, correlating survival with market share.
On the left side, the pros of penetration pricing are outlined. Key benefits include the ability to achieve rapid market penetration and the potential for increased sales volume, which can lead to economies of scale in manufacturing and supply chain processes. Additionally, the low margins associated with penetration pricing can deter new entrants, creating a more favorable environment for established players.
Conversely, the right side details the cons of adopting this strategy. A significant drawback is the establishment of low price expectations, making it challenging to raise prices later without risking customer dissatisfaction. The slide also highlights potential negative brand perception, where products may be viewed as low quality due to their pricing. Furthermore, low margins can jeopardize profitability, particularly in volatile markets where raw material costs fluctuate. Lastly, the strategy may leave substantial consumer surplus unclaimed, indicating missed revenue opportunities.
An example provided illustrates how penetration pricing is effectively used by manufacturers from China, who often set low prices to rapidly gain market share, particularly among price-sensitive consumers. The note at the bottom cautions that aggressive market penetration can sometimes lead to price wars, which typically result in unfavorable outcomes for all parties involved. This analysis serves as a critical consideration for any organization contemplating its pricing strategy in a competitive environment.
This slide is part of the Price War Strategy PowerPoint presentation.
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