What is penetration pricing?

Penetration pricing is entering a market at a deliberately low price — sometimes below cost — to win share fast, betting that volume, retention, and later price increases will outlast the thin margins. It is the mirror image of price skimming, and the default playbook for challengers attacking an incumbent’s margin.

For incumbents, a penetration-priced entrant is the pricing-page change most worth catching early: matching the price destroys your margin, ignoring it cedes the low end. The usual defenses are segmenting (a lighter tier), out-positioning on value, or raising switching costs — all of which work better with lead time, which is what price monitoring buys.