What is penetration pricing and can you give me some examples?

What is penetration pricing and can you give me some examples?

Penetration pricing is a strategy where a product is introduced at a low price to attract customers quickly. For example, a new streaming service might offer a low subscription fee for the first year to gain market share.

Can you explain why companies use this strategy?

Companies use penetration pricing to quickly attract a large customer base, discourage competitors, and establish brand loyalty. It can lead to higher sales volume and market presence.

What are some risks associated with penetration pricing?

Risks include potential losses if the low price doesn't cover costs, difficulty raising prices later, and attracting price-sensitive customers who may leave for cheaper options.

Can you give me a real-world example of a company that used this strategy?

Sure! Netflix initially used penetration pricing by offering low subscription rates to attract users, which helped them grow rapidly in the competitive streaming market.