Difference between Loss leader and Penetration? (1 Viewer)

[seano77]

What is the difference between the loss leader pricing strategy and the penetration pricing strategy?

Thanks.

 

[Alvik]

Loss leader is when the price is set below its production cost, as in the business is selling it for less then what it cost to make (not making a profit) -> done to quickly get a big market share

Penetration pricing is setting it as low as possible but above its production costs (to still make a profit) -> done once again to quickly gain a market share

 

[Kirsty Xx]

Loss leader - Item that has been priced below cost to attract customers who will then presumably purchase other, profitable products (usually of a higher price).

Penetration pricing - A strategy by which an organisation enters the market with an initial lower market price in an attempt to reach the largest possible market immediately.

So... loss leader is all about putting a new item out there which is priced below other competitors (and sold below the cost of production) in hope that consumers will also be persuaded to buy other existing products in the meantime, where penetration pricing is all about a company entering a new market and trying to have competitive edge over competitors by having one low priced item in order to reach the largest market of consumers possible.

edit: lol oops, beaten.