What is an advantage of using penetration pricing for a new product introduction?

Using penetration pricing as a strategy during the introduction of a new product involves setting a low initial price to attract customers and establish a foothold in the market quickly. This approach is beneficial because it encourages a rapid gain in market share by making the product more accessible to a larger audience, thus increasing sales volume rapidly.

By offering a lower price point, the strategy not only attracts cost-sensitive consumers but also creates a barrier for potential competitors, who may find it challenging to enter the market at a competitive price. The rapid customer acquisition can help establish a brand presence and build customer loyalty, which can prove advantageous for long-term sustainability. As the product gains traction and market share increases, there may be opportunities to gradually raise prices once the product is established. This combination of quick market penetration and the potential to later adjust prices makes penetration pricing an effective strategy for launching new products.