When does it pay to lower prices?

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A market penetration strategy is an effective way to gain market share quickly, especially in competitive markets. It involves offering a product at a lower price than the competition, thereby attracting new customers. An example is Netflix, which introduced attractively low subscription prices early on to quickly gain a subscriber base.

The benefits of this strategy include rapid market capture, as lower prices attract a large number of customers, allowing market share to increase rapidly. In addition, price-sensitive customers italy phone number data are attracted and more likely to choose cheaper options, which in turn increases sales. This model can also lead to the so-called network effect, whereby an increasing number of users attracts more customers, further strengthening the company's position in the market.

However, this strategy carries some risks. Low profit margins can lead to a reduction in revenue in the short term. Companies must keep a close eye on their operating costs and try to optimize their processes to minimize the negative effects of price reductions. In addition, to remain in the market and compete with other operators, companies must invest significant resources in marketing and promoting their products . High advertising expenditure is necessary to raise awareness of the brand and convince customers to choose a cheaper option over more expensive alternatives.