Underpriser

Underpriser is a term used in economics and business to describe a pricing strategy where a company intentionally sets the price of its products or services below the market rate, often below its own production costs. This strategy is typically employed for specific strategic purposes rather than as a long-term pricing model.

One of the primary reasons for underpricing is to gain market share rapidly. By offering lower prices, a company can attract a large customer base away from competitors, especially when entering a new market or launching a new product. This can lead to increased sales volume and brand recognition. Another objective can be to drive competitors out of the market. If competitors cannot sustain prices as low as the underpricer, they may be forced to reduce production or exit the market altogether, leaving the underpricer with less competition.

Underpricing can also be used to establish a perception of value or affordability for a brand. Once customers are accustomed to lower prices, it can be challenging to raise them significantly later. In some cases, underpricing might be a tactic to clear excess inventory or to meet short-term sales targets. However, if maintained for too long, underpricing can lead to financial losses, damage brand reputation by associating it with low quality, and make it difficult to achieve profitability.