Disadvantages of Market Penetration Pricing

Disadvantages of market penetration Pricing Strategy

1.    High growing market

This strategy will not work in high growing market and competitor will react accordingly. The new entry cannot be avoided with low prices if the market has a lot of growth opportunity for example the telecom sector almost in every country of the world four to five companies can get their share even by offering higher prices than competitors.

2.    Price is only one factor

The price is only one of the factors for capturing the market. There are also other factors for example a brand name if branded competitor enter in the market even with the high price there is fair chance that he will lead the market. The other factor is product quality and features for example if your competitor enters in the market with improved product with same price or relatively high price then competitor will get his share from the market.

3.    Low price may result in high loses

The lower prices are possible by keeping the profit margin low. This situation may result in heavy losses if there is fall in demand. The profit margin should be sufficient enough to cover the fixed cost as well. Some company’s takes into account only the marginal cost for pricing decision and this situation may lead for heavy losses if the due consideration is not given to fixed cost.