Penetration pricing
Launching at a low price to win buyers and market share quickly, then raising it once the brand is established or costs fall with scale. It fits categories where volume brings lower unit costs, network effects or habits that are hard to break. The risk is that the low price becomes the brand: when it goes up, many of the buyers it attracted leave.
Where it's used
Used for launches in crowded or price-sensitive categories, subscriptions and platforms that need many users fast. Good when scale lowers costs or raises the value of the product for each user.
How to calculate it
Revenue = Subscribers × Monthly price
Worked example
Illustrative numbersA streaming service launches at 5 a month while rivals charge 10 and gets 100,000 subscribers. A year later it raises the price to 8 and keeps 70% of them.
Revenue at launch price
100,000 subscribers × 5 price = 500,000
Revenue after the rise
100,000 subscribers × 70% stay × 8 price = 560,000
What it tells you
Revenue rises 12% even though 30,000 people leave. The plan only works if retention after the rise is tested early, not assumed.