LivingSocial

1LivingSocial's penetration pricing and the missing path to profit

• LivingSocial chased growth with low prices and never defined how it would earn later. The company raised more than $900 million, and by 2015 it had four years of losses totaling more than $1 billion.

  The book's verdict: "No one paid much attention to how the company would ultimately make money." It is presented as a penetration pricing strategy that lacked a monetization plan.

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• Write down how you will monetize before choosing penetration pricing. Penetration is the riskiest strategy for profit. It only works with network effects, planned price hikes, or real expansion revenue, so define that path concretely and track it.

  If you can't name the path, choose maximization or skimming instead. The book contrasts LivingSocial with Lexus, which entered low and raised prices more than 40 percent five years later.

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