Which type of pricing strategy often relies on the assumption that buyers are sensitive to price changes?

Market penetration pricing is a strategy designed to attract a large number of customers by setting a low initial price for a product or service. The underlying assumption of this approach is that potential buyers are sensitive to price changes and that a lower price will drive higher sales volume, helping to capture market share quickly. By using this strategy, businesses aim to generate a customer base and increase market visibility, especially when entering a competitive market.

Once the initial market penetration has been achieved, companies might then adjust prices upward, supported by the established customer relations and market position. This technique requires careful consideration of costs and long-term pricing strategies to ensure profitability after the initial period.

Other pricing strategies, while they may also consider price sensitivity to some degree, focus on different aspects, such as perceived value, psychological impact on consumer behavior, or adaptive pricing based on demand. However, market penetration pricing distinctly emphasizes the concept of attracting price-sensitive customers through initially lower pricing to foster quick market acceptance and expanded customer growth.