Tornado Pricing Strategy
Price to capture market share
The Tornado Pricing Strategy involves setting prices to capture market share, particularly during the tornado phase of market growth. This strategy prioritizes market share over profit margins, recognizing that market leaders will emerge and dominate the market. The goal is to be the first to hit the next lower strategic price point, creating a burst of new volume and expanding market share.
- Price to capture market share, not to maximize profit margins
- Be the first to hit the next lower strategic price point
- Commoditize the whole product to reduce costs and increase distribution efficiency
- Determine the next strategic price pointAnalyze market trends and competitor pricing to identify the next strategic price point that will create a burst of new volume.Pro tipUse data and market research to inform pricing decisionsWarningBe cautious not to underprice or overprice, as this can harm market share and profitability
- Design partners in and outRecruit partners to create a powerful whole product, then design them out as the market commoditizes.Pro tipFocus on creating a seamless user experience and reducing distribution frictionWarningBe aware of the potential for partners to become competitors
- Institutionalize the whole productEstablish the whole product as the market leader, then commoditize it to reduce costs and increase efficiency.Pro tipUse marketing and sales efforts to promote the whole product and establish it as the standardWarningBe prepared to adapt to changing market conditions and competitor strategies
Intel has used aggressive pricing to capture market share and dominate the microprocessor market.
Microsoft has used its whole product strategy to establish itself as the market leader in the software industry.
This strategy is based on observations of successful companies in high-tech markets, such as Intel and Microsoft, which have used aggressive pricing to capture market share and dominate their respective markets.