Penetration Pricing Strategy:
1. Price Setting: Penetration pricing involves setting a relatively low price initially to gain a large market share.
2. Market Entry: This strategy is used when a company enters a new market or launches a new product.
3. Customer Attraction: The low price is intended to attract customers who are price-sensitive or who are looking for a good deal.
4. Competitive Advantage: It helps the company establish a competitive advantage by quickly gaining market share and potentially deterring competitors.
5. Profit Generation: The aim is to generate profits through high sales volume rather than high prices.
6. Potential Loss: Initially, the company may incur losses due to the low pricing, but it expects to make up for it with increased sales over time.
7. Demand Generation: The lower price stimulates demand by making the product more affordable and accessible to a larger customer base.
8. Market Positioning: The company positions itself as a value-for-money option in the market.
9. Pricing Flexibility: Penetration pricing allows for more flexibility in adjusting prices in the future as the market and competition evolve.
10. Long-term Strategy: It is a long-term strategy that focuses on market share growth and building customer loyalty.
Skimming Pricing Strategy:
1. Price Setting: Skimming pricing involves setting a high price initially to maximize profits from early adopters and customers willing to pay a premium.
2. Market Entry: This strategy is used when a company introduces a new and innovative product with limited competition.
3. Targeting Early Adopters: Skimming pricing targets early adopters who are willing to pay a premium price for acquiring the latest product.
4. Profit Maximization: The high price allows the company to maximize its profits from the initial demand before competition intensifies.
5. Limited Sales Volume: Skimming pricing may result in lower sales volume initially due to the premium price, but the profitability per unit is higher.
6. Competitive Advantage: The high initial price may act as a barrier to entry for potential competitors, giving the company a competitive advantage.
7. Value Perception: The high price creates a perception of exclusivity, quality, and innovation in the minds of customers.
8. Pricing Inflexibility: Skimming pricing strategy may be less flexible in adjusting prices in the long run as customers expect prices to decrease over time.
9. ROI Focus: The strategy aims to quickly recover research and development costs and generate a high return on investment.
10. Short-term Strategy: Skimming pricing is typically a short-term strategy, as prices are expected to decrease gradually as competition enters the market.
Describe the 10 main diffrences between penetration pricing and skimming pricing strategies
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