5. Penetration pricing

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5. Penetration pricing

Entering a saturated market is tough! But what if — a late-comer wants to enter a saturated market fast? The answer is simple — offer a ‘substantially’ low price.

When Jio was launched in 2016, the Indian telecom market already had 10+ competitors.

Bloomberg

The price of 1 GB of data before the entry of Jio was 300/month and calls were charged at 0.50/minute.

Jio offered unlimited calling with 10GB of data in their basic offering (in fact, free for the first three months). Such pricing was unheard of in the telecom industry and led to several customers switching to Jio or buying another Jio sim card.

Fast forward to 2021, Jio is the telecom market leader.

5.1 When does penetration pricing work well?


Penetration pricing works well when you launch your product in a saturated market and have the luxury of enough cash or time or both.

  1. Jio could play out the penetration pricing game as it brought in an initial investment of ₹1.65 lakh crore.
  2. Google Photos wiped out many of its competitors by offering free unlimited storage for years because of Google’s clout.

5.2 End goal of penetration pricing


The end goal of penetration pricing is to survive for the longest till the competition is wiped out and then gradually increase the price.

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  1. Jio has gradually increased its price and the plan that it offered for peanuts initially, costs 129 now.

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  1. Google Photos has planned to end its unlimited free storage plan from 1st June ‘21.

5.3 Launching a product at a low price to test adoption


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Swiggy launched its subscription service - Super at a throw-away price. The idea was to test the hypothesis and understand its demand - Do Swiggy users really want a Super subscription? Once they validated the demand, they revamped & launched it as three different plans at a much higher price point.


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