Penetration Pricing vs Skimming Pricing Strategies: Difference and Comparison

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

  1. Penetration pricing sets a low initial price to attract customers and gain market share quickly.
  2. Skimming pricing starts with a high price to capitalize on early adopters, then lowers it over time.
  3. 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.

Penetration Pricing vs Skimming Pricing Strategies
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Test your knowledge about topics related to business

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Who is not entitled to the share of profits?

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Non-economic activities aim at __________.

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The method of evaluating the efficiency of workers is termed as _________.

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Office is a place where ___________.

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This city has the highest cost of living in the world.

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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 ComparisonPenetration Pricing StrategySkimming Pricing Strategy
Meaning/ DefinitionThe 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.
PricesInitially, the prices are low.Initially, the prices are high.
ProcessThe market in penetrated. The market is skimmed.
ProductsThe products are sold in large quantities because they are priced low.The products are sold in small quantities because they are priced high.
AimTo 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

  1. 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.
  2. The margin in the penetration pricing strategy is lower than that in the skimming pricing strategy.
  3. 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.
  4. 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.
  5. 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.
References
  1. https://pubsonline.informs.org/doi/abs/10.1287/mksc.2014.089
  2. https://www.hindawi.com/journals/mpe/2019/1287968/

Last Updated : 09 September, 2023

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