Explain market skimming and market penetration pricing strategies

One stage is particularly challenging:

Explain market skimming and market penetration pricing strategies

This approach is based on identifying opportunities and occasions when customers are willing and able to pay more, and then charging the customer top dollar.

Explain market skimming and market penetration pricing strategies

The window of opportunity for a skimming pricing strategy isn't indefinite, because your business will eventually run out of customers who value your product enough to pay more than it's worth, at least relative to the labor and materials you put into it.

However, if you price your offerings strategically, you'll be able to leverage their enthusiasm to maximize your profit. Earning All You Can As a business owner, there are so many occasions when you don't earn as much as you would like, and you end up spending more than you'd hoped.

A skimming pricing strategy is a chance to make back some of those losses, insulating yourself financially by earning all you can, while the time is right.

Putting a product on the market can be an expensive and time-consuming process, and if your offerings will have a limited life cycle or shelf life, you may as well do all you can to recoup your initial invest while you can.

Price skimming - Wikipedia

It is entirely possible that your product will continue to earn you money over time, but it makes sense to fully reap the benefits of its short-term appeal, because you can't predict its long-term success with certainty.

The Marketing Angle When you price your products, using a skimming strategy, you spread the message that they're special and worth the extra money you're charging. While you may alienate shoppers who specifically search for deals, you're likely to attract others who are dazzled by cache and drawn to items that other people value enough to justify a higher price, even if only in the short term.

A skimming pricing strategy is an especially effective marketing tool if you release your product in limited initial runs, creating the impression of scarcity and prompting a cycle of limited supply and increased demand. Sales Partnerships When you sell your products for higher prices, the retail businesses you partner with earn extra as well.

In addition, if you create marketing buzz by promoting your product as a premium item, you'll help lure customers into businesses that carry it. While they're there, they're likely to buy other items, as well, increasing the benefits for your retailers and distributors.

References 2 QuickBooks Resource Center: About the Author Devra Gartenstein founded her first food business in In she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.The opposite new product pricing strategy of price skimming is market-penetration pricing.

Instead of setting a high initial price to skim off each segment, market-penetration pricing refers to setting a low price for a new product to penetrate the market quickly and deeply.

Jun 26,  · Penetration pricing and price skimming are marketing strategies commonly implemented when companies launch new products or services. Both approaches have worked for businesses, but you have to.

Explain market skimming and market penetration pricing strategies

Price skimming and penetration pricing both are pricing strategies used by companies when they launch a new product in the market; however both strategies are different from each other. A skimming pricing strategy is based on charging extras when a product is first released and passionate customers are willing to pay extra.

Skimming offers the advantages of bringing in extra. Penetration pricing occurs when a company launches a low-priced product with the goal of securing market share. For example, a sponge manufacturer might use a penetration pricing strategy to lure customers from current competitors and to discourage new competitors from entering the industry.

Home» Pricing Decisions» Explain New Product Pricing strategies or, Explain Skimming Pricing and Penetration Pricing strategies. Email This Post New product pricing – There is great flexibility with the organisations in setting a price for a new product as compared to the product in other stages of life cycle.

Pricing Strategies: Price Skimming and Penetration Pricing