What is meant by penetration pricing?

Penetration pricing is a marketing strategy where a company sets a low initial price for a new product or service to attract customers and gain market share quickly. This approach aims to entice consumers away from competitors and encourage trial, with the expectation that once a customer base is established, prices can be gradually increased. It is particularly effective in competitive markets or when targeting price-sensitive consumers. However, it requires careful planning to ensure long-term profitability.