![]() Customer Expectations: Customers who initially purchase at low prices may resist price increases, making it challenging to transition to a more profitable pricing strategy.Competitor Reactions: Competitors may respond with price wars or other competitive actions that can erode profits for all players.Sustainability: Reducing prices significantly for an extended period may not be sustainable for all businesses, especially if production costs are high.Profit Margins: Businesses need to carefully manage their margins to avoid prolonged periods of losses associated with penetration pricing.Customer Loyalty: If the product quality and customer experience meet expectations, penetration pricing can lead to long-term customer loyalty.Competitive Advantage: Competitors may struggle to match or respond to the aggressive pricing, giving the business an advantage.Consumer Attraction: Lower prices attract price-sensitive consumers, creating a customer base that might otherwise have been inaccessible.Market Entry: Penetration pricing allows new businesses or products to enter a competitive market and quickly gain market share.Initial discounts or special promotions are offered to attract shoppers. E-commerce: Online retailers frequently use penetration pricing to introduce new products or brands to their platforms.Once customers are engaged with the service, prices may increase gradually. Video Streaming Services: Many streaming platforms offer free trial periods or heavily discounted initial subscriptions to entice users to sign up. ![]() However, prices are reduced over time to attract a broader customer base.
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