What is penetration pricing and how does it affect customer perception?

What is penetration pricing and how does it affect customer perception?

Penetration pricing is a strategy where a product is launched at a low price to attract customers. It can create a perception of value.

Can you explain how this strategy influences customer loyalty?

Certainly! By offering lower prices initially, customers may feel they are getting a great deal, which can enhance loyalty if they perceive ongoing value.

Are there any risks associated with penetration pricing?

Yes, risks include potential losses if the price is too low for too long, and customers may expect low prices permanently.

How do competitors typically respond to penetration pricing?

Competitors may lower their prices, improve their offerings, or enhance marketing efforts to retain their customer base.

Can you give examples of companies that have successfully used this strategy?

Sure! Companies like Netflix and Spotify initially used penetration pricing to attract subscribers and build a large user base.