Penetration of Pricing Strategy in Business

SELECTION OF PENETRATION OF
PRICING STRATEGY IN A
BUSINESS
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Chapter 1: Introduction
Overview of the title
Penetration pricing strategy refers to the marketing strategy applied by an organisation,
with aim of attracting larger base of customers towards new services or products offering a lower
price or cost during its initial offerings. This is essential for an organisation because it will help
an innovative service or products penetrate the market as well as attract customers away from
competitors. There are different advantages of using penetration pricing strategy for an
organisation. These are: increased customer interest, reduced competition, more brand loyalty,
increased sales and many more. All these are main advantages of penetration pricing strategy
that will be beneficial for an organisation in attainment of competitive advantages in successful
and within minimum time period. Along with this, penetration pricing strategy is a type of
pricing strategy which is applied to speedily gain market share through setting an originally low
price to induce customers to buy. Such kind of pricing strategy is mainly applied by new entrants
into a market. There is different rationale behind selection of penetration pricing i.e. capture
market share, develop brand loyalty, switch customers from competitors, drive competitors out
of market, create significant demand etc. There are different advantages of penetration pricing
for an organisation including high adoption and diffusion, marketplace dominance, economic of
scale, increased goodwill, high inventory turnover and many more. These are major advantages
of penetration pricing that will help a business organisation in attraction of maximum customers
within less time period.
Background of an organisation
Lidl is a chosen German international discount supermarket chain for this research.
Company was founded in 1973 by Josef Schwaez and headquartered in Neckarsulm, Baden-
Württemberg. Company served their products and services in also different nations such as
Europe, Hong Kong, United States. Lidl used penetration pricing strategy for attracting
maximum number of customer base towards their products and services. main purpose of Lidl is
to increase customer base that is only possible by using penetration pricing strategy.
Research aim
“To identify the impact of penetration pricing strategy in attracting customers towards
new product or services. A study on Lidl.”
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Research objectives
 To develop basic understanding regarding the penetration of pricing strategies in context
of an organisation.
 To determine the significance of penetration pricing strategy for company.
 To examine the relationship between penetration pricing strategy and customer attraction.
Research questions
 What is penetration of pricing strategy in an organisation?
 What is the significance of penetration pricing strategy for a company?
 What is the relationship between penetration pricing strategy and customer attraction?
Rationale of the research
Main rationale behind selecting this topic is to identifying the issues of lack of customer
base within an organisation. This is a main reason behind doing this investigation and for this
penetration pricing strategy will be used because it will support an organisation by incurring
customer base. High customer turnover is not good for the growth and success of an organisation
because it reduces brand value in marketplace.
Significance of the research
Current dissertation is important and significant for an individual, organisation and many
other stakeholders. For individual, this dissertation help researcher by enhancing their different
types of research skills such as literature review, time management, communication, data
collection and so on. With the help of all these skills, researcher can easily complete each
activity of dissertation in systematic and successful manner. For organisation and other
stakeholders, present investigation helps them by improving their knowledge about penetration
of pricing strategy along with its effectiveness in attraction of larger customer base.
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