They do not replace the information that we have discussed to this point, but they are important to understand. In a typical economic analysis of pricing, the demand curve shows the quantity demanded at every price. This is an oversimplified example, but it shows an important relationship between price and demand. She can make adjustments to product, promotion, or distribution to increase the value to the customer in order to increase demand without lowering price. Price skimming involves the top part of the demand curve.
Starting and running a successful business requires you to attract enough customers with your products and services to generate revenue in excess of your company's expenses. Market share and market penetration are common terms in business management that describe different aspects of the relationship between businesses, their products and services and their consumers. Market share describes the proportion of sales in a given market that a certain company controls. In other words, your company's market share is the percentage of customers that choose to buy your company's products or services.
Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. Market penetration pricing relies on the strategy of using low prices initially to make a wide number of customers aware of a new product. Penetration pricing examples include an online news website offering one month free for a subscription-based service or a bank offering a free checking account for six months. Penetration pricing, similar to loss leader pricing , can be a successful marketing strategy when applied correctly.
Market penetration is one of the four alternative growth strategies in the Ansoff Matrix. A market penetration strategy involves focusing on selling your existing products or services into your existing markets to gain a higher market share. This is the first strategy most organizations will consider because it carries the lowest amount of risk. This strategy involves selling more to current customers and to new customers who can be thought of as being in the same marketplace.