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 numbers

    A 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.