Numerous products are available on the market today. Numerous suppliers sell these products. These products are manufactured by a variety of companies and brands, and over time, they are sold by suppliers and purchased by customers. This entire cycle continues to play out in the market.
The most difficult stage in this regard is the introductory stage, during which the company must first determine the price of its new product. Companies can pursue one of two pricing strategies during this stage: price-skimming or market-penetration pricing. We will discuss these two strategies in detail in this article.
Skimming Pricing
What does "skimming pricing" mean?
Price skimming is a product pricing strategy in which a business charges the highest initial price possible and then gradually reduces it.
Price skimming is a pricing strategy that a business can use when launching a new product or service.
What is an illustration of a price skimming strategy?
Price skimming is frequently used to promote new technologies. DVD players are an excellent illustration of this. When DVD players first became available in the late 1990s, they costed up to $900. Now, a quick search on Amazon reveals that a new DVD player costs just $45.
What businesses use price skimming?
Price skimming is most prevalent among technology giants such as Apple, Samsung, and Sony, as well as other companies that develop new technologies that they anticipate will be in high demand.
Penetration Pricing
What does "Penetration pricing" mean?
Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by initially offering it at a discounted price. The lower price aids in the penetration of a new product or service into the market and draws customers away from competitors.
What are the advantages and disadvantages of penetration pricing?
The Benefits and Drawbacks of Penetration Pricing By offering products at low prices, penetration pricing stimulates market growth and captures market share. This strategy aims to maximize profits by achieving maximum sales with a low profit margin.
Which businesses make use of penetration pricing?
Grocery store chains may employ penetration pricing to promote a brand by offering discounted food products. Executives can also prioritize popular or high-value products when developing their price plans in order to increase sales.
What is an example of penetration Pricing?
Examples of penetration pricing include an online news website providing one month of free service for a subscription-based service or a bank providing a free checking account for six months.
Conclusion
To maximize short-term profits, price skimming raises prices to attract customers who are most interested in the product or service. Lower prices are used in penetration pricing to build a customer base for new products or services.
