While on the other hand, the skimming strategy keeps the prices high from the start and cuts them down slowly as the competition grows. The basic meaning of adopting a penetration strategy is to set low prices for the products and services to get a high market share by targeting a large number of customers. These differences have been discussed below: Difference between penetration pricing and skimming pricingīoth the penetration and skimming pricing strategies are used for the new entrant products and services, but both have many differences that must be understood to avoid any undesired consequence. This is seen by analyzing the prices of previously launched PlayStations. PlayStation 5 by Sony when newly launched had a higher price, but as the competition grows its price declined. Later on, when the competitors start launching their competitive products, it reduces the price. Apple first launched its products at a higher price knowing that people will buy the product. Skimming pricing exampleĪpple iPhone can be one of the most famous examples of brands using a skimming strategy. So, the strategy works best when the customers are highly interested in the product or service that you are offering. Otherwise, it can create a fertile ground for competitors to reduce their prices and attract customers. Skimming pricing is used for highly specialized products that are valuable to the customers and they are willing to pay high for them. This type of strategy is adopted when customers do not find any other alternative to be the similar product. Initially, this type of strategy generates profitable sales but the sales are usually small in number. Skimming pricing is the opposite of penetrating, it involves setting high prices in the beginning and slowly reducing them to attract more people. This helps it making people taste the variety and once they get used to it the price is set to the normal. Starbucks uses a penetrating pricing strategy to attract customers for its new seasonal drinks. This indicates that the company uses a penetrating strategy for its prices and has successfully attracted millions of users.Īnother example can be Starbucks.
#Penetration pricing strategy example free#
If you or your friends are users of it, you might have heard about the Netflix one-month free subscription. Netflix can be one the most well-known example of a penetrating pricing strategy. Its opposite can be the slow penetration strategy where a low promotion is done by keeping the prices of products low as well. A rapid penetration strategy is the one where a high promotion is done but the prices are kept low. Penetration pricing further involves two sub techniques, rapid and slow penetration.
Despite the profits being low, a high number of sales can overcome or compensate for it.
This type of strategy is used to increase market growth from the start.
Market penetration pricing is normally adopted for new products or services to make their place in the market. Once the demand is increased, the price is increased. The strategy works by first increasing the demand of customers for the product. Although, this strategy usually does not lead to high profits in the beginning it can create a loyal customer base. Penetration pricing strategy involves setting low prices of the products for attracting a high number of customers to increase sales and market share. Let’s have a detailed understanding of the concepts for penetration and skimming price. On the contrary, the number of sales in skimming strategy is low because only the customers who are willing to pay differential price are limited, but it has high profit margin due to high price. Number of sales is high in penetration pricing due to a large number of customers drawn towards the product for its low price. So, the purpose of penetration pricing is to maximize market share by offering low price while the skimming price purpose is to maximize profit margins by offering high price. So, there is compromise on the revenue/profit.
#Penetration pricing strategy example trial#
On the other hand, example of penetration pricing includes an online service provider grants a free trial for one month. Skimming prices are when a technological company who set a higher price for its newly launched mobile phone. Skimming and penetration pricing examples Difference between penetration pricing and skimming pricing.Skimming and penetration pricing examples.
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