Penetration pricing
Penetration pricing uses a relatively low price to build demand or market share, potentially supporting scale, network effects or entry into a market. It requires a credible plan for recovering costs and sustaining the position; competitors can respond and customers may resist later increases. Distinguish a market-building strategy from a short-run one-off relevant-cost price. Check capacity and service quality before stimulating volume.
Worked example
A new subscription service uses a low introductory price to attract users, while assessing retention, support cost and the terms of any later price change.
Common mistake
High sales volume is not proof of success if customer lifetime contribution is negative or demand disappears when the promotion ends.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Direct | September 2026–June 2027 |
| ACCA | SBL | Direct | September 2026–June 2027 |