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.

http://firstround.com/article/WhatsApp-Used-This-Pricing-Strategy-to-Win-and-You-Can-Too

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s