Penetration Pricing Calculator

Penetration pricing launches a product below the prevailing market price to win share quickly, on the expectation that the price rises once a position is established. This calculator puts a figure on that expectation. It takes the discount you choose, measures what the entry price leaves against unit cost, and totals the shortfall across the whole entry phase. One assumption sits underneath everything it reports: target share is a number you enter, not a demand response the model derives, so nothing here tests whether the discount you picked would win the share you typed.

Four figures come back. The entry price, which is the market price less your discount. The unit volume your target share of the market represents. Revenue for a single period at the entry price. And the subsidy, the gap between unit cost and entry price multiplied out across every period the price is held. Revenue and subsidy sit on different time bases, one period against the full phase, so reading them as a pair understates how long the revenue takes to cover the cost.

Running the defaults

A market price of 100 discounted 30% gives an entry price of 70. Five per cent of a 10,000,000 unit market is 500,000 units, and those units at 70 bring 35,000,000 into a single period. Unit cost is 75, so each sale falls 5 short, and 500,000 units held for six periods puts the subsidy at 15,000,000. Spread the revenue across those same six periods and it reaches 210,000,000 against 225,000,000 of cost. The same 15,000,000 gap, seen from the other end.

The discount is the decision

Every other input scales the answer. The discount changes what kind of answer it is. At a cost of 75 against a market price of 100, any discount up to 25% leaves an entry price that still covers cost, and the tool reports no subsidy at all. One notch deeper at 30% and the six-period commitment is 15,000,000. At 40% the entry price is 60, the gap per unit trebles to 15, and the total lands at 45,000,000. At 50% it is 75,000,000. The subsidy does not track the discount in step, it accelerates, because price falls while cost stays put.

Which input moves which number

Only market price and discount touch the entry price. Market price moves it proportionally, so 10% on the price is 10% on the entry price. The discount pulls the other way and at its own scale: lifting it from 30% to 33% takes the entry price from 70 to 67. Target share, market size, unit cost and period count leave the entry price exactly where it was.

Those four act on the subsidy instead, and not evenly. Share, market size and period count are linear: add 10% to any one of them and the subsidy moves from 15,000,000 to 16,500,000. Unit cost is violent next to that. It enters only as the distance between cost and the 70 entry price, so a 10% rise from 75 to 82.50 stretches that distance from 5 to 12.50 and lifts the subsidy 150%, to 37,500,000. Market price carries a step in it too. Take it to 110 with the discount left at 30% and the entry price becomes 77, which clears the 75 cost, and the subsidy drops to zero. Near the cost line, small moves change the answer out of all proportion.

Selling under cost is a legal question too

Deep discounts held for a long stretch draw attention from competition regulators, and the threshold moves with the jurisdiction. UNCTAD supports competition and consumer protection regimes across its member economies, and the International Competition Network exists so agencies can align enforcement practice with one another, which is a fair measure of how much variation there is to align. A launch price that passes without comment in one market can read as predatory pricing in the next. The commercial failure modes turn up more often than the legal ones: customers who arrived for the entry price leave when it rises, and a competitor with deeper reserves can match the price and hold it there.

What the model leaves out

The subsidy is a plain sum with no discounting to present value, which overstates the cost of money tied up across a long phase, and both unit cost and volume are held constant throughout. Nothing models the exit. There is no price rise, no churn when it lands, and no revenue after the phase against which the subsidy might be earned back, so the number is a gross cost rather than a net one. The word "period" has no fixed length either, so whether the answer covers eighteen months or six years depends entirely on what you had in mind when you filled the field.