Essay on Penetration Pricing : A And Competitive Pricing Strategy

1080 Words Oct 8th, 2016 5 Pages
Question 2
Penetration Pricing: a Penetration pricing strategy is the strategic application practice of settling an initial price that is far lower than the projected standard price for the product. The strategy is essentially also know as a price war. This strategy goes for the lowest and deepest price cut, to ensure that the product at any given time in the market has the lowest price compared to its competitors. The business would only use this strategy if they need an exceptionally low price to draw attention to their product or to fend off competitors. Because this is a new product and there are no competitors, this strategy won’t be suitable. This strategy more suitable during products growth phase, especially if a brand name already has a positive reputation.
Competition / Competitive Pricing: This strategy focus on charging a price that is comparable to other brands selling the same product. Business would use a competitive pricing strategy when there are a number of other businesses that sell the same product and there are little or few distinction between the different products. The market leader commonly set the price for a product and the other suppliers have no other option but to follow in order for them to remain competitive. They would either match the price of the leader in the market or set their prices in a comparative range. Essentially a competitive pricing strategy aims to charging prices that are comparable to other products selling in the same line,…

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