And in a market heavily driven by consumer trust and brand loyalty, many consumers are reluctant to switch brands or try new products. After all, the reasoning goes, why spend money on a product that might be awful? Penetration pricing introduces customers to a new product at a steep discount, and often at a loss to the merchant. Here are five examples of penetration pricing strategies being put to work. Television and Internet providers are notorious for their use of penetration pricing — much to the chagrin of consumers who see massive sudden increases in their bills. At the end of a specified period, the price increases.
Apple skimming pricing strategy
Market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service. Market penetration can also be used in developing strategies employed to increase the market share of a particular product or service. Market penetration can be used to determine the size of the potential market. If the total market is large, new entrants to the industry might be encouraged that they can gain market share or a percentage of the total number of potential customers in the industry. The penetration numbers might indicate the potential for growth for cell phone makers. In other words, market penetration can be used to assess an industry as a whole to determine the potential for companies within the industry to gain market share or grow their revenue through sales. Revisiting our example, the global cell phone market penetration is often used to estimate whether cell phone producers can meet their earnings and revenue estimates.
APPLE – MARKETING METRICS
Technology pundits and press, alike, seem obsessed with market share. But obtaining large market share is just one of many successful business strategies. Android follows a penetration pricing strategy. Apple uses a skimming strategy.
Market penetration refers to the successful selling of a product or service in a specific market. It is measured by the amount of sales volume of an existing good or service compared to the total target market for that product or service. Igor Ansoff first devised and published the Ansoff Matrix in the Harvard Business Review in , within an article titled "Strategies for Diversification". With numerous options available, this matrix helps narrow down the best fit for an organization. This strategy involves selling current products or services to the existing market in order to obtain a higher market share.