This strategy helped Netflix quickly establish itself as a dominant player in the streaming industry. When Netflix expanded its streaming services globally, it adopted penetration pricing by offering low monthly subscription fees. Netflix is a prime example of successful penetration pricing. Real-world Examples of Penetration Pricing Netflix Since these companies may have enough resources available, they may be able to sacrifice short-term profits to establish their new products. Established Businesses that Offer New ProductsĮstablished firms can also use penetration pricing when they launch new products. These firms use penetration pricing to steal market share from existing firms. Penetration theory is often used by businesses that are new to the market. There are two primary users of penetration pricing, as explained below: New Businesses Some examples of such products include the internet, cable, and software-as-a-service (SaaS) products. Penetration pricing is suitable for those products that are used by mass markets and are not so unique and innovative. What Types of Products are Suitable for Penetration Pricing? It means the customers should be price sensitive, and charging a lower price should increase the quantity demanded by a large percentage.
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