Penetration Pricing

                       
Penetration pricing is when a company strategically lures customers away from a competitor by setting a low initial price.

Penetration Pricing Examples

    Netflix penetrated the DVD rental industry by being more convienient and cheaper
    Southwest penetrated the airline industry due to their low fares
    Android devices penetrated the cell phone market with high quality and low cost phones

Deeper Insights

Penetration pricing is driven by the simple desire to save money. By entering the market with a lower price than competitors, a business with a penetration pricing strategy stands a better chance of attracting first-time customers. The strategy also creates barriers of entry into the market for other new businesses who may not be able to compete with the low prices set forth.

 

Penetration pricing has been used successfully in a many industries. The main aspect that makes penetration pricing successful is the ability to sell at a lower price while mainting the same value (for the most part) as competitors.

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Related Keywords: Power PricingPredatory PricingOptional-Product PricingPrice Elasticity