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Lost leader and penetration pricing strategies
The penetration pricing strategy simply refers to the system whereby a new product is introduced into the market with a low price so as to attract customers from the competitors’ products (Pamudji, Wissa Harry, Heny Daryanto & Setiadi Djohar, 2015). Lost leader pricing on the other hands is whereby a product is sold at a price below its cost so as to lead customers to buying more goods that are profitable and therefore generating a huge volume of sales (In, Younghwan & Julian Wright, 2014). The difference therefore is that lost leader focuses on generating high sales for the company’s existing products while the penetration pricing simply looks at beating the competitor’s through lower prices to gain base for the new product.
Work cited
In, Younghwan, and Julian Wright. “Loss-leader pricing and upgrades.” Economics Letters 122.1 (2014): 19-22.
Pamudji, Wissa Harry, Heny K. Daryanto, and Setiadi Djohar. “Cost Based Penetration Pricing Strategy for Beverages Industry.” International Journal of Scientific and Research Publications (2015).