What is the primary strategy behind penetration pricing?

The primary strategy behind penetration pricing involves setting a low price to enter a competitive market. This approach is designed to quickly attract customers by making a product or service more affordable, encouraging rapid market adoption. The objective is to gain market share and establish a customer base, even if it means sacrificing initial profit margins. By offering a lower price point than competitors, businesses can entice price-sensitive consumers and create a strong foothold in the market.

Once the product has gained traction and a loyal customer base, the business may then consider raising prices gradually. This strategy is particularly effective in markets with high competition, as it can disrupt existing pricing norms and position the new product favorably against established brands.