Question

Discuss how companies take penetration pricing and skimming pricing for products which are new to market.

What is the purpose behind this give with example

- The subject is ( Marketing).

Answer 1

For the new product, company can use the penetration pricing and skimming pricing by as follows -

Skimming price - Under this strategy, an introductory is charged for an innovative product when later on the price is reduced then more market enters the market with the same type of product. If the new products are highly distinctive and the demand for the original product is highly enelastic, and this is the best method to adopt.

The purpose of adopting this method is to earn an excellent profit for a short period and then reduce price when more competitors enter the market.

Penetrating price - This strategy means using lower initial prices to capture a significant market. This forces the customer to buy the product and company can obtain a considerable share and leave tiny percentage for the competitors. This method of price strategy is attractive when the price elasticity of demand is high, and substitute of the product is readily available when a firm can increase its production capacity with an increase in demand. When customers highly price sensitive, which means customer quickly shift to another brand if it is available at a lower price.

And when there is high competition in the market.

The purpose for adopting this strategy is to capture the significant share in the market at an early stage of releasing the new product in the market and leave no chances for a competitor to take any stock, in the market.

*PLEASE RATE WITH A THUMBS UP *