Put-out pricing
Also called: put-out strategy
What is put-out pricing?
In put-out pricing, a manufacturer or retailer offers its products (usually temporarily) at a greatly reduced price. The selling price is so low that sometimes even losses are made on product sales. The purpose of this strategy is to squeeze weaker competitors out of the market during this period.
The expectation is that the loss will be rectified once the market share is increased and the product is offered again at a regular price. In practice, mainly market leaders will be able to afford this tactic.
When competitors go along with price cuts, this can result in a price war. From this, a race to the bottom can eventually occur.
The difference between put-out and stay-out pricing?
In stay-out pricing, a company at chooses to deliberately keep its prices stably low. With this strategy, profit margins are therefore relatively low. The idea behind this is that this makes it uninteresting for newcomers to enter this market, thus limiting competition.
Thus, the major difference between the strategies is that put-out pricing pushes current competitors out of the market, while stay-out pricing tries not to let new entrants into the market.
