If it had priced itself closer to Netflix at launch, it could have increased its average revenue per acquisition (ARPA), but it would not have been able to build its customer base as fast. Instead of making people choose which streaming service to go with, Disney+ priced itself aggressively low to entice new customers to buy their service while also keeping Netflix. Monthly willingness to pay for Netflix and Disney+. So, when Disney+ decided to launch its own streaming platform at the end of 2019, it decided that penetration pricing was its best shot.Īs we saw in our Pricing Page Teardown on Netflix and Disney+, Disney’s initial offering of $6.99 is well under its customers’ willingness to pay. Established brands like Netflix and Hulu have serious brand recognition and a loyal customer base. The streaming entertainment market is one of the most difficult spaces for new companies to enter. The competitive nature of these products and the sheer number of choices most consumers have make it difficult to gain a footing in a new market without a strong acquisition strategy. Penetration pricing is a popular tactic in the business-to-consumer (B2C) market. If you’re considering a penetration pricing strategy, it’s important to start building strong customer relationships immediately to retain customers long-term. This process of raising prices is the most difficult aspect of a penetration pricing strategy, as customers who jump ship to go for the cheaper offering are more likely to do so again as prices increase. Once these companies have grown their customer base, they can start increasing the price to capitalize on willingness to pay. Instead of having to compete with established brands solely on the value their product or service provides, this penetration strategy helps companies acquire new customers through price alone. How penetration pricing worksīy pricing below what current consumers expect to pay, companies can increase awareness of their product or service early on and attract customers faster. These companies “penetrate” the market by offering a lower price than their competitors-enticing customers away from their current provider in an effort to gain market share. Penetration pricing is an acquisition strategy for companies that are trying to gain a foothold in highly competitive markets.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |