vs. Sidecar
Uber
Blitzscaling: price as a supply lever
- What it did
- Surge pricing (2012); $2.4B raised in 2014 to fund fare cuts with driver guarantees
- Sidecar
- Declined surge; $35M in total, 8 metros against Uber's 205+
Strategy Map›Layer 5 · Go-to-Market Strategy›Monetization Strategy/How the price compares+ from outside the named canon
Penetration Pricing
What is Penetration Pricing?
Penetration pricing is entering or expanding in a market at a price well below the incumbent's, or below the going rate for a comparable offer, on purpose, to win adoption or share fast. It pays off when the volume, learning or lock-in it brings covers the margin given up.
How Penetration Pricing works
A price well below the incumbent pulls buyers across quickly; it lasts only if volume, utilization or cost position lets the company keep the price once the rival responds.
How companies won with Penetration Pricing
From the win chains in Strategy Canon case studies: what the winner did, and what its rival did at the same step.
vs. Linode
DigitalOcean
$5 SSD droplet priced for trial, debt-funded
- What it did
- $5 SSD plan January 2013 lifted signups from 10-20 to 100-400 a day
- Linode
- Self-funded $20 floor; $10 plan June 2014, $5 plan February 2017
vs. Rally Software · 2002–15
Atlassian
Innovation: a professional issue tracker bought online at team prices, with no salesperson
- What it did
- Founders built Jira after bug trackers failed their support work (2002)
- Rally Software
- Sold one-year subscriptions through a direct sales force
vs. E*Trade · 2013–15
Robinhood
Commission-free trading in a simple phone app, no minimum
- What it did
- Founders who sold algorithmic trading software to banks and hedge funds (2011–12) saw institutions trading almost free while retail paid about $10 a trade (2013)
- E*Trade
- Charged $7–10 per stock trade (2018); commission per trade $6.66 in Q4 2018, guided to $6.60–7 for 2019
Also tagged: AGNT / eXp · Amazon · Carvana · MoviePass · NeueHealth (Bright Health) · Oscar Health · Practice Fusion · Salesforce · Sidecar · SoFi · Toast · Zscaler
The question to ask of a company
How far below the incumbent was the entry price, and why was it set there?
Who names it
| Author | What they call it / where it appears |
|---|---|
| Nagle & Müller + | Penetration pricing |
| Bill Gurley + | Lower price, higher utilization, more demand |
Note. Near miss: A cheaper product that does much less than the incumbent, sold as a different category. Does not count: A price list without a comparison, a promotional discount for a few weeks, or a free product paid for by a third party.