Penetration Pricing

Definition: this is a pricing technique of settling a relatively low initial entry price so that its lower than the retail price, thus attracting customers to what seems and what is a great deal.The low price increases over time as the product becomes successful, for example, a product might start at 5p and over 3 months, may increase to 30p.

Penetration pricing is most commonly associated with a marketing objectvie of increasing market share or sales volume rather than to make a profit in the short term.

1. it can achieve high market penetration rates quickly, this is the result of fast diffusiona and adoption
2. this can create more trade through word of mouth
3. creates cost control, leading to greater efficiency
4. low prices act as a barrier to discourage entry for other competitiors
5. can create high stock turnovers through distribution channels
6. can be based on marginal cost pricing which is economically efficient

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Coin Values Note Values
1p £5.00
2p £10.00
5p £20.00
10p £50.00