Penetration Pricing is a strategy used by organizations to attract customers to a new product or a service. It involves presenting a lower price for a new product or a service during its initial offering. The lower price strategy aims at luring customers away from the competitors. The marketer relies on this strategy based on the idea that the lower prices attracts the attention of the consumers and makes them aware of the new offering and entices them to try the new offering.

The major advantage of penetration Pricing is that the new offering captures a quick market share and thus helps the organization achieve economies of scale through the increased sales volume.

Penetration Pricing is appropriate in the cases where the demand is highly price elastic and the offering has high demand.