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Topic: Penetration pricing


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In the News (Wed 19 Jun 19)

  
  Penetration pricing - Wikipedia, the free encyclopedia
Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price.
Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than short term profit maximization.
An interesting variant of the price penetration strategy is the bait and hook model (also called the razor and blades business model) in which an initial product is sold at a very low price but subsequently purchased products (such as refills) are sold at a higher price.
en.wikipedia.org /wiki/Penetration_pricing   (522 words)

  
 Pricing - Wikipedia, the free encyclopedia
Pricing is one of the four aspects of marketing.
In economic terms, it is a price that shifts most of the consumer surplus to the producer.
The classic example of this is the pricing of the snack cake Twinkies, which were perceived as low quality when the price was lowered.
en.wikipedia.org /wiki/Pricing   (921 words)

  
 Pricing New Products
Such a price ceiling, based on a product's benefits, may ultimately prove to be unrealistic: there may not be a sufficient market at that level, it may leave too much room for competitors, or customers may be strong enough to demand a greater share of the value the product creates.
If penetration pricing ignites demand that can't be met, the supplier is injured twice: margins are lost needlessly because available supplies could have been sold at higher prices, and delivery delays or failures - a factor in the overall perception of a product's benefits -- could undermine customer satisfaction.
Penetration pricing could also be appropriate if a company's competitors have higher cost structures or are locked into channel agreements that limit their pricing freedom.
www.inc.com /articles/2003/07/pricing.html   (3271 words)

  
 Marketing - pricing strategies - penetration pricing
Penetration pricing involves the setting of lower, rather than higher prices in order to achieve a large, if not dominant market share.
Before implementing a penetration pricing strategy, a supplier must be certain that it has the production and distribution capabilities to meet the anticipated increase in demand.
The most obvious potential disadvantage of implementing a penetration pricing strategy is the likelihood of competing suppliers following suit by reducing their prices also, thus nullifying any advantage of the reduced price (if prices are sufficiently differentiated the impact of this disadvantage may be diminished).
www.tutor2u.net /business/marketing/pricing_strategy_penetration.asp   (325 words)

  
 Pricing Strategies
The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply.
Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies.
Geographical pricing is evident where there are variations in price in different parts of the world.
www.marketingteacher.com /Lessons/lesson_pricing.htm   (470 words)

  
 Penetration pricing
Penetration pricing is the pricing technique of setting arelatively low initial entry price, a price that is often lower than the eventual market price.
A common solution to the price expectations problemis to set the initial price at the long term market price, but include an initial discount coupon (see sales promotion).
In interesting variant of the price penetration strategy is the bait and hook model (also called the razor and blades business model) in which aninitial product is sold at a very low price but subsequently purchased products (such as refills) are sold at a higher price.
www.therfcc.org /penetration-pricing-1044.html   (392 words)

  
 Price Penetration
Price elasticity is a measure of the market's responsiveness to a price change.
More specifically, the penetration price is usually set higher than the firm's marginal cost to bolster profitability.
The polar opposite to penetration pricing is called skim pricing.
www.msb.edu /faculty/homak/HomaHelpSite/WebHelp/Price_Penetration.htm   (561 words)

  
 A little like Goldilocks
However, as historical price data for a service as new as DSL is largely non-existent, several considerations and strategies must be examined to price DSL within the context of fundamental economic principles.
Price elasticity of demand is a measure used by economists and managers to determine how the demand for a good or service will respond to a given price.
Penetration pricing is the process of setting a relatively low initial price for a service.
telephonyonline.com /mag/telecom_little_goldilocks/index.html   (1793 words)

  
 G649 Selecting an Appropriate Pricing Strategy, MU Extension
To determine the price to be charged given price flexibility, the producer will need to factor in the effects of competition and profit objectives.
Once the break-even price is known, the firm establishes a markup for each unit to be sold.
Penetration pricing is used when a company launches a product in a market with several competitors.
muextension.missouri.edu /explore/agguides/agecon/g00649.htm   (1573 words)

  
 [No title]
As one of the two basic tactics in a standards war, penetration pricing is almost always necessary in order to jump ahead of your competition.
In this respect, penetration pricing could actually make a negative impression on the customer by suggesting that a product or service that can be used for free may not be as dependable or useful as one that comes at a cost.
In closing, penetration pricing is necessary in order to remain a fixture in your respective market as long as it is carefully planned and well implemented.
students.ou.edu /S/Mike.C.Skinner-1/essay3.doc   (232 words)

  
 Armstrong - Marketing   (Site not responding. Last check: 2007-09-17)
While the decline in prices of consumer electronics is nothing new, the rapid shift from price skimming to penetration pricing in the case of DVD players came as a surprise to industry observers.
Some recent price hikes are attributable to the 3 percent inflation rate and increased prices on oil and meat due to shortages.
A cookie-cutter approach to pricing, where one price fits all, is likely to be replaced by more dynamic pricing models as more and more companies mine their rich data sources to optimize their pricing.
www.pearsoned.ca /armstrong/in_the_news/ch10_itn.html   (3745 words)

  
 Study Guide, Chapter 18
The two international companies had agreed on the price that would be charged on industrial diamonds, which are used on industrial cutting tools.
It charges a substantially lower price to companies that operate multiple locations where its appliances can be used -such as a restaurant chain.
It charges a higher price to companies that have fewer than three operations because there is much less opportunity for repeat business.
www.harding.edu /USER/slwilliams/WWW/mstudy18.htm   (797 words)

  
 Will it make a profit?
Form figure 2 for the price discrimination method (£1.00), I will have to sell just over 40 000 of drinks a year to make my business to break-even, and in which would be 769 products a day.
Priced at £1.00 is extremely expensive for those can't afford high prices.
If I had to reduce price due to competition, for the first pricing method I think that it would be like 'throwing the business down the gutter'.
www.coursework.info /i/17185.html   (583 words)

  
 Marketing mix: Pricing Strategies (4 p's)
Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation.
Pricing a product too high or too low could mean a loss of sales for the organisation.
The pricing strategies are based much on what objectives the company has set itself to achieve.
www.learnmarketing.co.uk /price.htm   (341 words)

  
 University of Kentucky - Independent Study Program - Assignment-Chapter 11
setting a low initial price to penetrate the market quickly and attract a large number of buyers to win a large market share.
pricing to attract low volume in many segments so as to gradually penetrate the market as a whole.
If a stereo priced at $300 is compared to one that costs $299.95, the $299.95 is considered much cheaper than the $.05 price difference.
gatton.uky.edu /ispmkt300/Ch11_Assignment.htm   (533 words)

  
 Multiple Choice Quiz
The first handheld calculators were priced at several hundred dollars so that its manufacturer could recoup research and development costs.
While many people believe shoes are simply something that you wear on your feet to protect them from the environment, many other people believe the kind of shoes a person wears makes a statement about them and their lifestyle.
She reduced the price on the other three sets to $16.49 and was able to sell all three sets.
highered.mcgraw-hill.com /sites/0072410752/student_view0/chapter14/multiple_choice_quiz_1.html   (1051 words)

  
 Responding to Penetration Pricing n Turbulent Markets   (Site not responding. Last check: 2007-09-17)
Price often becomes the weapon of choice for many corporations as they compete to retain market share and revenue.
If prices must be lowered, the cost structure of the existing products and services should be vigorously re-evaluated to reduce costs in order to bring them in line with the competition.
Companies that approach pricing as an integrated process rather than a tactical event in time can effectively break the spiral of low pricing during new entrant penetration pricing tactics.
www.pricingsociety.com /htmlnewsletter/responding_to_penetration.htm   (1154 words)

  
 [No title]
For example, both teams should address the assumptions about price elasticity that are necessary for your strategy to work.
Is there a significant segment that is price inelastic and how big is it (price skimming), or is the market largely price elastic with respect to this product.
The lead-in could be something like: Ladies and gentlemen, our team believes that a profit (or market share) pricing objective combined with a cost-oriented (or demand-oriented), skimming (or penetration) pricing method can be successful.
www4.ncsu.edu /unity/users/g/gvoss/www/marketing/Aug.doc   (455 words)

  
 Marketing - pricing strategies - expansionistic pricing
Expansionistic pricing is a more exaggerated form of penetration pricing and involves setting very low prices aimed at establishing mass markets, possibly at the expense of other suppliers.
The extreme case of expansionistic pricing, where offerings are made available to the (overseas) market at a price that is actually less than the cost of production is known as dumping.
Where low prices (annual subscription rates) attract a large number of subscribers, publishers can benefit from the higher rates that they are able to charge advertisers for their advertising ‘space’.
www.tutor2u.net /business/marketing/pricing_strategy_expansionistic.asp   (259 words)

  
 bp_kotler_pom_10|Pricing Strategies|Concepts Check
The intent of Market--Skimming Pricing is to set a low initial price to penetrate the market quickly and deeply in order to attract a large number of buyers quickly and to capture a large market share.
A firm that is practicing captive product pricing may charge a low price on the main product but set a high markup on the supplies.
For segmented pricing to be effective, members of the segment paying the lower price should be able to resell the product to the segment paying the higher price.
wps.prenhall.com /bp_kotler_pom_10/0,,624081-,00.utf8.html   (550 words)

  
 [No title]   (Site not responding. Last check: 2007-09-17)
Company executives must determine pricing objectives, strategies, and a list price for the heater/blower unit and warming covers which will achieve a profitable initial level of hospital penetration and longterm profitability from continued sales of wanning covers or blankets.
To illustrate a common pricing problem, particularly prevalent to businessto business marketing, where there is broad latitude in pricing, difficulty for a new company in gaining market penetration, and frequently unanticipated barriers to entry.
The costs underlying the pricing decision are simple enough to lay out, but students soon realize that there is much more involved in a pricing decision than cost behavior.
www.csupomona.edu /~rwschaffer/IBM421/augustine1.doc   (564 words)

  
 Multiple Choice Questions
When the price setter stresses the supply or cost side of the pricing problem they are using what approach?
Pricing for some products are based on where tradition or other competition factor dictates.
Successive pricing by competitors to increase or maintain their unit sales or market share is called:
highered.mcgraw-hill.com /sites/0070898332/student_view0/chapter14/multiple_choice_quiz.html   (387 words)

  
 Penetration Pricing   (Site not responding. Last check: 2007-09-17)
going to be tough for vendors in India as their pricing becomes more...
The success of the sponsorship of the national sprint car series over the past two years has enabled Proton to increase its market penetration, particularly in...
Beijing-based research firm Analysys International estimates that PC penetration in China...
www.wikiverse.org /penetration-pricing   (605 words)

  
 1   (Site not responding. Last check: 2007-09-17)
The use of penetration pricing typically discourages or blocks competition from entering a market.
The purpose of unfair trade practice acts is to protect consumers from price fixing and price discrimination activities.
While the price of most strollers is under $150, the introductory price of the Frog Bugaboo was $699.
www.harding.edu /USER/slwilliams/WWW/mquiz18.htm   (377 words)

  
 Price Elasticity and Pricing Policy (Penetration or Skimming) - Notes - Business Accounts - Accounting and Finance - ...
If the firm cuts its price by 10%, and the demand for their product increases by 20%, then the price elasticity of demand will be 2.
In this situation you would clearly want to cut your price as cutting it has generated a lot more business, and so although you're getting less money for each one you sell, you're selling plenty more to make up for it.
They would be selling a few more, but not enough to make up for the fall in price and their sales revenue would go down.
bized.ac.uk /learn/business/accounting/busaccounts/notes/srev-th.htm   (516 words)

  
 F02 Exam3   (Site not responding. Last check: 2007-09-17)
When IBM introduced a line of high-powered personal computers for business and scientific purposes, they priced them at roughly half what competitors were charging.
Which pricing method is demonstrated by the following statement.
A method of setting price by estimating the price consumers would be willing to pay for the item and then working to assure necessary margins for the retailers and wholesalers is:
www.csulb.edu /~cabramso/fall02/300/300_ex3.htm   (2057 words)

  
 Chapter 8
The process of setting a high price for a new product to gain maximum revenues layer by layer from the segments willing to pay the high price is called:
A(n) ________________ is a price reduction to buyers who pay their bills promptly.
FOB-origin pricing occurs when the company charges the same price plus freight to all customers, regardless of their location.
ollie.dcccd.edu /mrkt2370/Chapters/ch8/8test.htm   (364 words)

  
 Mobile Phone News: PCS effect on cellular phones leaves questions as panelists discuss valuation methods - pricing seen ...
The group, speaking recently at the GTE Convergence '94 conference, also agreed that, for the most part, personal communications services (PCS) will be a game that only the big pockets can win and that the effect the new technology will have on cellular is uncertain.
Merrill Lynch First Vice President Linda Runyon noted that the penetration rate of cellular phone users will continue to grow steadily as today's generation of children, who have been raised to think of mobile phones as "normalcy," reach adulthood.
To achieve the high penetration rate, however, and to compete eventually with landline telephones, pricing will have to drop substantially, Runyon said.
www.findarticles.com /p/articles/mi_m3457/is_n40_v12/ai_15775355   (544 words)

  
 List of marketing topics: Penetration pricing
The advantages of penetration pricing to the firm are: * It can result in fast diffusion and adoption.
* It can be based on marginal cost pricing, which is economically efficient.
Price Penetration is most appropriate when: * Product demand if highly price elastic.
www.americanfactfinders.com /List_of_marketing_topics/Penetration_pricing.shtml   (484 words)

  
 Pricing Strategy   (Site not responding. Last check: 2007-09-17)
That is, is your pricing strategy a strategic component or non-strategic component?
Examples: cost-plus or markup pricing, skimming, competitive pricing or going-rate pricing, perceived value or value pricing, everyday low pricing, high-low pricing, penetration pricing.
What is your rationale for your pricing strategy (p.
www.highpoint.edu /~jwehrley/ba211/Pricing.html   (232 words)

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