The main disadvantage with penetration pricing is that it establishes long-term price expectations for the product, and image preconceptions for the brand and company. It can be based on marginal cost pricing, which is economically efficient.It can create high stock turnover throughout the distribution channel, which can create critically important enthusiasm and support in the channel.Low prices act as a barrier to entry (see Porter's 5-forces analysis). It discourages the entry of competitors.It creates cost control and cost reduction pressures from the start, leading to greater efficiency.It can create goodwill among the early adopters segment and can create more trade through word of mouth.It can result in fast diffusion and adoption, which can achieve high market penetration rates quickly and take the competitors by surprise, not giving them time to react.These are advantages of penetration pricing to the firm: Penetration pricing is most commonly associated with marketing objectives of enlarging market share and exploiting economies of scale or experience. The strategy works on the expectation that customers will switch to the new brand because of the lower price.

Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth.

A company that used penetration pricing