Advantages of Market Penetration Pricing Strategy

Advantages of Market Penetration Pricing Strategy

There are number of advantages associated with market penetration strategy. These advantages has been briefly explained below

1.    High Market Share

Main advantage of keeping the prices low is to attain high market share. People are psychologically attracted to buy the product. This strategy is very effective for launching of new product.

2.    Discourages Competition

Other advantages of market penetration pricing are to discourage the new entry in the market. Businessman loves to enjoy competition free market, because there are number of advantages are associated with competition free market.

3.    High profit are possible

Market penetration can get high profit due to establish relationship between volume of sales and profitability. We know that profitability rises with rise in volume of sales.

4.    Reduces stock obsoletes

High sales volume in market penetration pricing strategy reduces the chances of stock obsoletes. Stock obsoletes are critical for some industries like fashion industry.

5.    Customer Loyalty

Low prices can be a source of wining the customer loyalties. This can be easily done by offering quality product at lower prices.

6.    Future product Launch

High market share by reducing prices can be helpful for launching the future products. People knowledge about the reputation of the entity plays important role in introducing new products.

7.    Cost control is focused

Low price means low unit profit, and therefore management try to keep the cost under control, otherwise cost may jump higher than selling price, and such situation can bring disaster results for organization.