Describe two potential pricing strategies that a firm may adopt when entering a new market (4)

When entering a new market, firms may adopt penetration pricing to encourage sales. This is when the price of a product is low when it enters a market, and is increased as it saturates the market. This is done to encourage sales of the product and increase competitiveness so the product can be a market leader. Alternatively, another pricing strategy that could be used is premium pricing. This occurs when a firm wants a product to be perceived as more luxurious, thus, will encourage customers to buy the product on the assumption that it will be of a higher quality. This often occurs when products are marketed to be fair trade.