What pricing strategy involves setting a low price supported by strong promotion to achieve high sales volume?

Penetration pricing is a strategy where a business sets a low initial price for a new product or service to attract customers and gain market share quickly. The goal is to encourage a large volume of sales, which can help establish a foothold in the market. Strong promotional activities often accompany this pricing strategy to raise awareness and generate interest among potential buyers.

This approach can be particularly effective in markets with high competition or where price sensitivity is significant among consumers. By offering a lower price, a company can entice customers to try its product, potentially leading to brand loyalty and repeat purchases once the initial price advantage is lost or reduced. Over time, businesses may gradually increase their prices as they secure a loyal customer base.

In contrast, other pricing strategies like cost-plus pricing involve determining price based on costs plus a markup, value-based pricing is focused on the perceived value to the customer, and price leadership refers to a scenario where one company sets the price that others follow, generally found in oligopolistic markets. These strategies do not prioritize the same aggressive approach to pricing and promotion aimed at rapidly increasing sales volume as penetration pricing does.