Definition of price penetration

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Penetration pricing is the practice of setting an initial price much lower than the eventual standard price. Using skimming, they market products at high prices with relatively high margins. Taken to the extreme, penetration pricing is known as predatory pricingwhen a firm initially sells a product or service at unsustainably low prices to eliminate competition and establish a monopoly. Thus, the company makes more money from the cartridges than it does for the printer itself. Disadvantages While often profitable, penetration pricing has some major drawbacks including customer dissatisfaction, and false loyalty. How Target is different from its competitors such as Walmart and Costco.

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Costco and Kroger, two major grocery store chains, use penetration pricing for the organic foods they sell.

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Accounting terms

Skimming is a method used by identity thieves to capture information Traditionally, the margin on groceries is minimal. A company's market share is the percentage it controls of the total market for its products and services. A variant of the price penetration strategy is the bait and hook model also called the razor and blades business model. Selecting an Appropriate Pricing Strategy. Learn why grocery stocks are often overlooked by investors. We use cookies to give you a better experience.

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3 thoughts on “Definition of price penetration

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