2018-01-31 00:00:00 Growing a Business English Introduce your newest products to the market using penetrative pricing. Learn how this pricing strategy attracts customers, leads to higher... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/02/Woman-Ready-Explain-Penetrative-Pricing.jpg https://quickbooks.intuit.com/ca/resources/growing-business/penetrative-pricing-definition-explanation/ Small Business Terms: What Is Penetrative Pricing?

Small Business Terms: What Is Penetrative Pricing?

1 min read

Increase sales volumes, decrease production costs, and earn higher profits for your small business by using penetrative pricing to introduce new products to the market. To use this strategy in your small business, set the initial price of a new product lower than average to attract buyers and ‘penetrate’ the market. Since penetrative pricing works best when demand and competition are high, consider using it in your business to gain an edge over competitors and reach new customers who are looking for a lower price point.

Penetrative pricing has several benefits, making it an effective pricing strategy to try in your small business. Business that use penetrative pricing typically see an increase in overall sales volume. When customers find a great deal, they share it with friends and family and encourage them to purchase from your business. This increases your customer base and attracts new customers who may not buy from you otherwise. Penetrative pricing also decreases your production costs by allowing your business to order larger quantities of the same product. Suppliers often offer discounts with these larger orders to save your company money.

Keep your business’s penetrative pricing strategy successful by only offering the prices for a short introductory period. Maintaining low prices past that limited time frame typically leads to profit loss. Before implementing penetrative prices, talk to your suppliers and distributors to make sure they can keep up with the high demand to help you avoid product shortages and unsatisfied customers. Overall, using a penetrative pricing strategy has many benefits. When implemented properly, penetrative pricing leads to satisfied customers, increased sales, and higher profits for your small business.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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