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To increase sales, executives can also prioritize popular or high-value products when devising their price plans. Grocery store chains may use a penetration pricing strategy to promote a brand by offering food products at reduced rates. Penetration Pricing: What You Need To Know 5. As a result, travels who stay there refer Diamond Lodging to others and the company triples its revenue. To encourage travelers to stop there rather than another hotel service, they advertise reduced rates for one night spent in a master suite. Here's an example:Ī hotel company called Diamond Lodging establishes several locations along a multistate freeway many people use while traveling. This strategy can also help a company promote its varied services, including restaurant options or conference rooms. It may be especially helpful for securing long-term customers who travel often and may choose the same service in different locations. Hotels companies and other hospitality services use penetration pricing strategies to increase brand awareness and sales. increases its patron base by 6%, including referred clients from the national branches. As a result, more people who plan to open a new account call the local bank, as they're intrigued by the reduced fee offer. After a discussion, its leaders make plans to reduce all required fees for a new client to maintain an active bank account for the first six months. competes with multiple national bank branches operating in the same area. Here's an example:Ī local bank called Community Inc. This type of strategy can also help banks develop positive relationships with a clientele, which can become lifelong or intergenerational. As banks offer very similar services, it may be helpful for an institution to offer discounts or other sales deals, so new customers may have an incentive for choosing one service over a competitor. Banking institutionsīankers may use a penetration pricing strategy when giving new patrons options for opening a checking or saving account.

Related: Competitive Pricing: Definition and Tips 3. During the following year, more than half of the resulting clientele choose to sign another contract. As a result, multiple prospective clients sign a one-year contract, which increases the company's revenue by 20% in six months. To compete with established internet providers, Fastlane offers new customers both services for the price of only one during the first year after they sign up. Here's an example:Ī cable provider called Fastlane plans to incorporate a new high-speed internet service. Penetration pricing can help engage prospective customers who may appreciate a reduced price option so they can sample a company's services and compare between different providers. During that time, they can offer other amenities to supplement the increased cost, including a new phone extension or access to certain digital tools. Internet and cable provider companies sometimes offer new customers a reduced price for multiple channels or website access, then slowly increase that price afterward. As a result, the company becomes a leader in the industry and doubles its subscriber count.

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To better compete with larger streaming services in the industry, its sales representatives offer new subscribers free access to all programs for 30 days after they initially sign up, then $4.99 per month after that. Here's an example:Ī company called Fine Tune Streaming hosts old and new television shows for a subscriber base. This strategy also serves as promotional content, which may help a customer choose one service over another. It helps show customers both a preview of paid content and a reflection of how a company engages with its clientele.

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Many streaming services use penetration pricing strategies to grow a subscriber base by providing a trial period to prospective customers. Here are some common examples of penetrating pricing: 1.

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Doi penetration pricing strategy