Penetration pricing

What is penetration pricing and how does it impact market entry and competition?

Penetration pricing is a strategy in which a product is introduced to the market at a price lower than the eventual market price. The primary aim of this approach is to rapidly reach a wide segment of the market and secure a significant market share. By offering a product at a lower price, sellers can attract a large number of consumers and deter them from using competitive products. Once the product has established itself in the market and built a loyal customer base, sellers may then raise the price to a more sustainable level. In the context of sneaker reselling, penetration pricing can be utilized when introducing a new brand or model to the market. If a reseller gets exclusive access to a new line of sneakers, they might sell them at a lower price initially to attract buyers and generate buzz. As demand grows and the sneaker becomes more popular, the reseller can then adjust the price upward. This strategy not only helps in selling more units quickly but also in establishing the sneaker's presence in the market. However, it's essential for resellers to ensure that the initial price covers costs and that there's a clear plan for adjusting prices in the future. Additionally, the quality and appeal of the sneaker should remain consistent, as lowering the price too much can sometimes give an impression of inferior quality.