Today, there exist several products in the market. These products are sold by various suppliers.
These products are manufactured by different companies and brands, and in their entire course of time, they are sold by the suppliers and bought by the customers. This entire cycle keeps on going in the market.
However, the companies that sell these products adopt different strategies and techniques in order to sell their product to the customers.
They try out different methodologies so that more customers are attracted to their product, and thus they buy their product. These strategies vary from one another, and they are categorized based on several parameters.
Two of those strategies are: 1. Penetration Pricing Strategy, and 2. Skimming Pricing Strategy.
Key Takeaways
- Penetration pricing sets a low initial price to attract customers and gain market share quickly.
- Skimming pricing starts with a high price to capitalize on early adopters, then lowers it over time.
- Penetration pricing works best for mass-market products while skimming pricing suits niche or luxury items.
Penetration Pricing vs Skimming Pricing Strategies
Penetration pricing is a pricing strategy used by companies where the cost of a product is reduced in its initial stages to attract customers. It aims to increase the sale of the product. Skimming pricing is a pricing strategy where companies initially sell a product at a high price, which is then gradually reduced to attract customers. The product is sold at lower quantities due to its high price point.
The strategy of product pricing in which companies set a lower price for a certain product in order to attract more customers initially is known as the penetration pricing strategy.
The penetration pricing strategy is one of the most useful strategies that a company can adopt in order to increase its sales for a certain product.
This strategy is not only used for products but also for various services. This strategy makes sure that the product penetrates the market with its initial low price and gains traction.
The strategy of product pricing in which companies set a higher price for a certain product initially and gradually, over the course of time, decrease its price in order to attract more customers is known as the skimming pricing strategy.
In the skimming pricing strategy for product pricing, the products bought by the initial customers increase the demand for the product, and then the companies lower the price so as to gain even more customers.
It ensures that the product is sold in different price ranges as it forms different layers of prices for the respective product over the course of time.
Comparison Table
| Parameters of Comparison | Penetration Pricing Strategy | Skimming Pricing Strategy |
|---|---|---|
| Meaning/ Definition | The strategy of product pricing in which companies set a lower price for a certain product in order to attract more customers initially is known as penetration pricing strategy. | The strategy of product pricing in which companies set a higher price for a certain product initially and gradually over the course of time decrease its price in order to attract more customers is known as skimming pricing strategy. |
| Prices | Initially, the prices are low. | Initially, the prices are high. |
| Process | The market in penetrated. | The market is skimmed. |
| Products | The products are sold in large quantities because they are priced low. | The products are sold in small quantities because they are priced high. |
| Aim | To attract customers and increase sales by penetrating the market. | To attract customers and increase sales by skimming the market. |
What is Penetration Pricing Strategy?
The strategy of product pricing in which companies set a lower price for a certain product in order to attract more customers initially is known as the penetration pricing strategy.
The penetration pricing strategy, in particular, aims to penetrate the market and is considered one of the most useful strategies to increase sales.
The penetration pricing strategy is one of the most useful strategies that a company can adopt in order to increase its sales for a certain product. This strategy is not only used for products but also for various services.
This strategy makes sure that the product penetrates the market with its initial low price and gains traction. There are several advantages of implementing a penetration pricing strategy in the market.
It sure does have some drawbacks, but the advantages are much more useful and helpful and result in the growth of the respective business, firm, company or brand. Many companies have implemented this strategy to grow their sales.
There are several examples of various companies that have adopted and implemented the penetration pricing strategy.
One of the most prevailing and common examples of the penetration pricing strategy is companies or websites offering a free subscription for a certain amount of time to their users so that after the free subscription, they attract more subscribers to their website.
What is Skimming Pricing Strategy?
The strategy of product pricing in which companies set a higher price for a certain product initially and gradually, over the course of time, decrease its price in order to attract more customers is known as the skimming pricing strategy.
The skimming pricing strategy, in particular, aims at skimming the market and is considered one of the most useful strategies to increase sales.
In the skimming pricing strategy for product pricing, the products bought by the initial customers increase the demand for the product, and then the companies lower the price so as to gain even more customers.
It ensures that the product is sold in different price ranges as it forms different layers of prices for the respective product over the course of time.
There are several advantages of implementing a skimming pricing strategy in the market. It sure does have some drawbacks, but the advantages are much more useful and helpful and result in the growth of the respective business, firm, company or brand.
Many companies have implemented this strategy to grow their sales. There are several examples of various companies that have adopted and implemented the skimming pricing strategy.
However, the company must know the limitations of this strategy before implementing and adopting it in order to avoid any sort of loss.
If the company is willing to take risks and is willing to compensate for the losses if the strategy fails, then the company must try to make this strategy work by taking every single aspect into consideration.
Main Differences Between Penetration Pricing and Skimming Pricing Strategies
- The strategy of product pricing in which companies set a lower price for a certain product in order to attract more customers initially is known as penetration pricing strategy, on the other hand, the strategy of product pricing in which companies set a higher price for a certain product initially and gradually over the course of time decrease its price in order to attract more customers is known as skimming pricing strategy.
- The margin in the penetration pricing strategy is lower than that in the skimming pricing strategy.
- The penetration pricing strategy initially sets lower prices for a product. On the other hand, the skimming pricing strategy initially sets a higher price for a product.
- The main objective of the penetration pricing strategy is to attract customers and increase sales by penetrating the market. On the other hand, the main objective of the skimming pricing strategy is to attract customers and increase sales by skimming the market.
- In the penetration pricing strategy, the products are sold in large quantities because they are priced low. On the other hand, in the skimming pricing strategy, the products are sold in smaller quantities because they are priced high.
- https://pubsonline.informs.org/doi/abs/10.1287/mksc.2014.089
- https://www.hindawi.com/journals/mpe/2019/1287968/
Last Updated : 09 September, 2023
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
The strategic examples provided for both penetration pricing and skimming pricing strategies offer practical insights into how these strategies are implemented by businesses. The advantages and drawbacks of each strategy are well-articulated, making it a useful resource for marketing professionals.
The article effectively illustrates the practical application of both pricing strategies. The examples offered demonstrate how companies adopt these strategies to achieve their sales and growth objectives. It’s a valuable resource for strategizing pricing approaches.
The information provided about penetration and skimming pricing strategies is very basic and doesn’t offer any unique insights. It lacks critical analysis and real-world case studies to support the theories presented. A more in-depth exploration of these strategies would enhance the content’s value.
The comparison between penetration pricing and skimming pricing is presented in a clear and understandable manner. The article effectively differentiates between the two strategies and their respective aims. I found the section on ‘What is Skimming Pricing Strategy?’ particularly informative.
I also found the skimming pricing strategy section to be very informative. It provides a comprehensive understanding of how companies strategically adjust product prices over time to attract more customers. The advantages of implementing a skimming pricing strategy are well-explained.
The content of this article is quite basic and doesn’t delve deep into the complexities of product pricing strategies. It lacks practical examples and case studies to support the theoretical analysis, which makes it less insightful.
The detailed comparison table provides a concise summary of the differences between penetration pricing and skimming pricing strategies. It’s a well-structured and informative article that can serve as a resource for businesses aiming to understand and implement effective pricing strategies.
I agree, the comparison table is very useful. It helps in visualizing the distinctions between the two pricing strategies. The article effectively articulates the aims and processes of both strategies, providing valuable insights for businesses.
The article stands out for its detailed explanation of the differences between the two pricing strategies. The emphasis on mass-market products for penetration pricing and niche or luxury items for skimming pricing is particularly noteworthy.
The article lacks depth in its discussion of pricing strategies. It provides a surface-level overview, but fails to explore the real-world implications of these strategies on businesses and consumer behavior. A more in-depth analysis would add value to the content.
This article offers an in-depth understanding of penetration pricing and skimming pricing strategies. The section on ‘What is Skimming Pricing Strategy?’ provides valuable insights into the layered approach of skimming pricing. It is a well-researched and informative article.
This article is a comprehensive and insightful analysis of product pricing strategies. It provides a clear explanation of penetration and skimming pricing strategies, their importance and their impact on sales. I appreciate the comparison table and the key takeaways, which provide a clear summary of the differences between the two strategies.
I completely agree. This article highlights the importance of pricing strategies in a competitive market and how they can influence consumer behavior. It’s a well-researched piece that can be valuable for businesses looking to develop effective pricing strategies.