Define penetration pricing

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You can have the best product or service in the world, but if you don't have a solid and contextually based go-to-market GTM strategy and execution plan, you will fail. Marketing plays the critical role in building brand awareness, lead generation, prospect and customer nurturing. Business schools and countless business books discuss the importance of the 4 Ps Product, Place, Price, and Promotion as the key components to a solid marketing approach. While all four Ps are important to a founding team's marketing strategy, the "P" I get asked the most about is pricing. Pick the right pricing model and you can transform your goals from concept to reality. Chose the wrong pricing strategy and you risk immediate failure.
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Penetration pricing

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Pricing strategies - Wikipedia

Penetration pricing strategy is generally used by late comers in the market. This pricing is typically used when the market is saturated or there are already many variants of the same product present in the market. Penetration pricing gives an edge to the company because many customers are attracted on the basis of price, or value for money and switch brands to adopt the brand offering low pricing on similar products. Most of the times, you will find the price cheaper for those products, where there is little product differentiation and the demand is price elastic. Customers will not care about the brand when they can get the same product for the same quality at lower prices. From the marketing objectives point of view, the strategy can lead to very interesting results if we were to look at the increase in market share and sales volumes due to use of penetrative pricing.
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penetration pricing

Under this strategy a high introductory price is charged for an innovative product and later on the price is reduced when more marketers enter the market with same type of product for example, Sony, Philips etc. When the same technology is used by other electronic companies in their product also then the price is reduced. Generally innovators use price skimming strategy to get reward for their research and development. The price skimming strategy cannot be used by every marketer.
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In the early stages of growth, pricing is one of the defining features of any software startup. So how do you decide what to charge for your product? Do you look at the competition?
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