market penetration pricing

Definition

Strategy adopted for quickly achieving a high volume of sales and deep market-penetration of a new product. Under this approach, a product is widely promoted and its introductory-price is kept comparatively lower. This strategy is based on the assumption that (1) the product does not have an identifiable price-market segment, (2) it has elasticity of demand (buyers are price sensitive), (3) the market is large enough to sustain relatively low profit margins, and (4) the competitors too will soon lower their prices.