Market Penetration Pricing - A Quick Market Entry Pricing Strategy

Market penetration pricing is a quick-entry price strategy that assumes low price will gain high sales volume which, in turn, will result in lowering costs. This strategy is used in price sensitive markets. For example, consider the market for DVD players; it is a high volume market, it has a high number of competitors, the costs to produce DVD players have fallen, and new and/or changing technology allow businesses to rapidly introduce new features and benefits on new models. The businesses that introduce DVD players quickly, sell high volume at low or reasonable prices, are following a market penetration strategy.

Businesses using market penetration pricing are usually trying to penetrate the market by growing their share of the market. They assume that the lowest price will win market share. Make sure that if you use this pricing strategy that you test your market, your price sensitivity and your price elasticity or in-elasticity first. Also be sure to do your market research to gain an understanding of how your competitors will react to this penetration pricing strategy. For example, your low price may cause your competition to lower price, then you will lower your price again, and so on - no one wins with a strategy like this.

Strategy

But your market penetration pricing strategy can also be a deterrent for new competitors who are considering entering the market. When they see how low your pricing is and realize that their margins will be low and the risk of gaining market share for new entrants is high, they might choose not to enter the market. For your business to be successful with this strategy, it must have the capability to enjoy the economies of scale that high volume will bring and be the low cost provider in the market.

If you are an existing business and your competitor is following a market penetration strategy, do a thorough market research assessment of your capabilities:

• Can you drive your costs down?
• Can you produce high volume?
• Do you want to sell your product at a low price (and hope volume sales will get you both the market share and the profitability you want)?

If you answer no to any of these questions, don't follow this penetration strategy (or at least, consider this strategy very carefully). However, if you are a new business considering this strategy in a new, or scarcely populated, market, focus on how to drive your costs down and your efficiencies up.

Whatever pricing strategy you use, make sure that you specify it in your marketing mix plan and write down the reasons you chose that strategy. Then, at least on an annual basis at the time of your business plan update, review your chosen marketing strategy (including your pricing strategy) and ensure it is the right strategy for the product life cycle, for the market conditions, for your buyers, and for the competitive environment at that time.

Market Penetration Pricing - A Quick Market Entry Pricing Strategy

For more information on pricing strategies, visit http://www.more-for-small-business.com/pricing-strategy.html and for more information on small business strategies and advice, visit http://www.more-for-small-business.com/
Kris Bovay is the owner of Voice Marketing Inc, a business and marketing services company. Kris has 25 years of experience in leading large, medium and small businesses.
Copyright 2008 Voice Marketing Inc.

Growing With Market Expansion Strategy

As you may already know that market expansion is one of the most common strategies in marketing. The general concept of market expansion is to start selling your product to new groups of prospective customer. If you manage to get in front of more prospect than last year, then you should be able to make more sales than last year too. There are two effective way to expand your market and your business. The first one is to introducing more products to the market, that way you will be able to get multiple new customer bases. The second one is to take an advantage of a product that is especially popular. This strategy will allow you to support the other product sales when your customers are drawn in by your best seller.

Offering more products

Strategy

Although not in an instant, introducing new product will strongly expand your share of particular market. If in the previous year you only sold 10 products, and you offer 20 in this year you will see that your sales will rise up two fold. Of course usually your new product will not sell as good as your old ones, but if you persist, you will catch up their sell in a couple of years. You can choose between adding new product by simply reselling or distributing product that complement with your line or you can innovate and create your own new product that nobody does before. It does not matter which one will you choose, you will have two important choice to do next that is to informing your customer that you have something new and you must convinced them to take a look.

Riding a bestseller to the top

Bestseller product is a product that sells multiple times than anything else. An outstanding bestseller can achieve a hundred or more time than the normal level of product in the same category. You can use this bestseller product to gain multiple profits than the usual easily. How do you create a bestseller product? Well you must do some research to find it. Look for something that has more potential than any other product. In your research you will need to try many alternatives. If you find a product that has a rapidly growth of sale then focus your marketing effort on that product and do not let yourself lose the momentum.

Growing With Market Expansion Strategy

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