WhatsApp Used This Pricing Strategy to Win and “The Penny Gap”

Price goes down demand goes up in equal measure.

Instead, price affects demand to a point, but the relationship is far from linear — there is a gap between free and any other price. This gap is known as “The Penny Gap”

While WhatsApp’s success is no doubt due in large part to the fact that they solved a major problem for a large number of users — exorbitant SMS charges and restrictions of local carriers — their savvy pricing decision is equally noteworthy. It not only helped them overcome the Penny Gap, but also allowed them to avoid advertising on the platform while creating the network value needed to lock in users.



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