This strategy helped Microsoft quickly gain significant market share in the gaming industry. If done well, penetration pricing can help you quickly gain a foothold in the market, whether it’s for a new product or when entering a new market.įor example, when Microsoft launched the Xbox gaming console in 2001, it sold the console at a loss to undercut market competition, mainly from the Sony PlayStation 2. It is important to use this strategy carefully because it can create an expectation of low prices, making it difficult to sustain customers long term. Companies may raise prices after they have successfully captured their targeted market share. Penetration pricing is often a temporary strategy companies employ to establish an initial customer base. Penetration pricing is a marketing strategy that involves setting a low initial price for a new product or service to quickly gain market share, attract customers, and establish brand presence.

So, what can you do to get the most out of your pricing strategy? What is penetration pricing? Pricing is one of the hardest puzzles product managers have to solve, especially when there’s a lot of uncertainty.įor example, determining the optimal penetration price for your product can be a daunting task, but it’s critical to capture your target market share quickly. You’re reviewing all the go-to-market material and you find yourself constantly revisiting and reviewing one particular section: pricing. Your product is looking great, things are falling into place, and you’re almost ready for launch.