Difference price skimming penetration pricing approach

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Pricing strategies tend to change as a product goes through its product life cycle. One stage is particularly challenging: the introductory stage. This is called New Product Pricing. When companies bring out a new product, they face the challenge of setting prices for the very first time. The first new product pricing strategies is called price-skimming. It is also referred to as market-skimming pricing.
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Pricing Strategies

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Pricing Strategies

Register now or log in to join your professional community. Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. It allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price. Price skimming is sometimes referred to as riding down the demand curve. The objective of a price skimming strategy is to capture the consumer surplus. If this is done successfully, then theoretically no customer will pay less for the product than the maximum they are willing to pay.
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Penetration Vs. Skimming Marketing Strategies

In terms of the marketing mix some would say that pricing is the least attractive element. Marketing companies should really focus on generating as high a margin as possible. The argument is that the marketer should change product , place or promotion in some way before resorting to pricing reductions.
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Penetration pricing strategy is one in which the company charges a low price, in the beginning, to derive maximum sales volume from the price-sensitive customers. On the contrary, when at the initial stage high prices are charged to the customers, which is gradually decreased to attain maximum profit from less price sensitive customers. The three major aspects that influence the pricing of a product are cost, consumer demand and competition. Basis for Comparison Penetration Pricing Skimming Pricing Meaning Penetration Pricing is a pricing technique in which the price set by the firm is low initially, so as to attract more and more customers. Skimming Pricing means a pricing strategy wherein the firm set high price for the product at its introduction stage so as to receive maximum profit.
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