Limitations of Market Penetration Pricing

Limitations of Market Penetration Pricing

Penetration pricing strategy to get high market share by reducing price does not hold true in all circumstances. There are some limitations of this strategy i.e. high competition in the market, high growth opportunities, quality of product, and brand role.

1.    Competitor Will React

Penetration pricing strategy does not work in competitive market, because in high competitive market, competitor will react immediately, and thus desired market share cannot be attain by redacting prices.

2.    Growth Encourages Entry

Penetration strategy cannot stop the new entry in the market, because growth opportunities will encourage people to invest in the industry to get their share out of growing market. Therefore penetration strategy will not prevent new entry in markets which have high growth potentials or expectations.

3.    Quality Does Matter

Price is not the sole factor for capturing the market share. Quality of product is also an important factor, and people are ready to pay high price for improved quality.Therefore improved quality at lower price is the best strategy to capture the market share, instead of just focusing on price reduction.

4.    Brand Name Play Role

It is not easy to compete with the good brand by lowering the price. People are ready to pay more for brand reputation. competing with a reputable brand by lowering prices is not a suggested option.