Penetration Policy
Also called: penetration pricing strategy
Penetration politics involves deliberately keeping the price very low when introducing a new product or service with the goal of capturing as large a share of the market as possible in a short period of time.
Usually prices are raised to normal levels over time. Penetration policies are mainly applied to consumer goods, in the expectation that many consumers will be willing to buy the product again after an advantageous introduction, even after raising the price.
When a new entrant's low prices are parried by established competitors, a race to the bottom can occur. Especially in markets with dominant parties, these sometimes choose to seal off the market to new entrants by adopting a stay-out pricing strategy.
