Here's How Penetration Pricing Works

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You can read more about dynamic pricing in retail in the article - Dynamic pricing in retail: what to do and what not to do.


Penetration pricing is a strategy used to capture lebanon telegram number database market share by pricing products below market value to attract customers. Once a company gains significant market share, they adjust their prices accordingly.


Consider Company X, a small to medium-sized soap manufacturer, selling lavender soap bars for $10. International Company Y, which has much higher production capacity, enters the market and starts selling a similar lavender soap bar for $5. This is a clear example of a penetration pricing strategy.

Y's goal here is to put small competitor X out of business, even if at $5 Y makes a very minimal profit, they are confident that X will not be able to match their prices. And when customers start buying from Y, X will eventually go bankrupt. This extreme form of penetrating pricing in retail is also often called predatory pricing.

The world famous Walmart has been doing this for decades and has become a big problem for small local retailers due to prices that are almost impossible to match.