Which pricing strategy involves initially setting a low price to enter a market?

The pricing strategy that involves initially setting a low price to enter a market is penetration pricing. This approach is designed to attract customers quickly by offering a better value than competitors, which can help establish market share in a competitive environment. By starting with a low price, businesses can encourage consumers to try their products, create brand loyalty, and build volume sales.

Over time, as the product gains acceptance and market penetration increases, the company may gradually raise prices. This strategy can be particularly effective in markets where price sensitivity is high and can help deter potential competitors from entering the market due to lower profit margins initially.

In contrast, skimming pricing involves setting a high initial price to maximize profits from early adopters before gradually lowering it. Competitive pricing is focused on setting prices based on competitors' pricing rather than starting low. Value-based pricing centers around setting prices based on the perceived value to the customer rather than just cost or competition. Each of these strategies has its own distinct aims and methodologies, but penetration pricing is uniquely characterized by its low initial pricing to gain market entry.