Penetration Pricing Calculator

Check whether a low launch price pays for itself once you raise prices.

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Penetration Pricing Calculator

Enter unit economics, the launch price and the later price.

Profit during the launch phase
β€”
Enter values above
Break-even volume at launch price
β€”
Monthly result at launch price
β€”
Monthly profit at normal price
β€”
Total profit over the period
β€”
Contribution per unit at launch
β€”

Worked example

With the default inputs shown below, this calculator returns the following results:

InputValue
Unit variable cost ($)12
Penetration price ($)15
Volume at penetration price (units/month)2000
Monthly fixed costs ($)5000
Months at the penetration price12
Normal price ($)22
Volume at normal price (units/month)1200
ResultValue
Profit during the launch phase$12,000
Break-even volume at launch price1,666.7 units
Monthly result at launch price$1,000.00
Monthly profit at normal price$7,000.00
Total profit over the period$96,000
Contribution per unit at launch$3.00

Values shown are produced by this page in your browser; change any input to update them.

How to use the Penetration Pricing Calculator

  1. Unit variable cost ($) β€” default 12
  2. Penetration price ($) β€” default 15
  3. Volume at penetration price (units/month) β€” default 2000
  4. Monthly fixed costs ($) β€” default 5000
  5. Months at the penetration price β€” default 12
  6. Normal price ($) β€” default 22
  7. Volume at normal price (units/month) β€” default 1200
  8. Press Calculate to update the results instantly.

Frequently asked questions

When unit economics are positive at the low price, switching costs or network effects lock customers in, and the higher price is credible later. Without those, you simply train customers to expect cheap.
That the higher price is rejected. Customers acquired on price are the least loyal, and churn spikes at the first increase.
Yes. Skimming earns more per unit early and funds the business; penetration buys share. Which is right depends on whether scale or margin is the binding constraint.

Sources & references