Concept:
Pricing strategies are crucial for product positioning. Market skimming and market penetration are two opposite approaches used mainly during product launch.
Answer: Market Skimming Pricing is a strategy where a company sets a high initial price for a new product to “skim” maximum profits from segments willing to pay more. Prices are gradually reduced over time. This strategy is suitable for innovative or unique products with less competition.
Market Penetration Pricing is a strategy where a product is introduced at a low price to attract a large number of customers quickly and gain market share. It is useful in highly competitive markets.
Difference:
Skimming uses high initial prices; Penetration uses low initial prices.
Skimming targets premium customers; Penetration targets mass market.
Skimming earns quick profits; Penetration focuses on long-term market share.
Skimming works with low competition; Penetration is used in high competition.
