Learn in the textbookPricing Strategy
DefinitionPenetration pricing (ペネトレーションプライシング) is a pricing strategy that sells a new product at a low price from launch, gaining many customers and a large market share in a short time.
ExplanationIn Japanese it is also called 市場浸透価格戦略 (market penetration pricing strategy). By spreading the product first and raising sales volume, it aims to lower the cost per unit through mass production and to put up a barrier against rivals who might enter later. Profit per unit tends to be small right after launch, and the approach relies on growing volume to become profitable.
AnalogyIt is like a newly opened diner that keeps its set meals affordable for the first few months to build up regular customers.
Memory hookThe English word penetrate means to soak in or seep through. Picture a low price letting the product seep into every corner of the market.