Chapter 19, Problem 1ALR

Summary Introduction

To differentiate: Between a penetration pricing strategy and a skimming price strategy and under which condition is each most likely to be used.

The amount or value of funds that are required to buy a product is termed as price.

Explanation of Solution

The difference between penetration pricing strategy and skimming pricing strategy is as follows:

Skimming pricing strategy: Is where they set a high price comparatively higher than the others. It is also known as market plus pricing.

Penetration pricing strategy: This strategy sets a lower price with respective to the competitor’s price in order to increase the demand and acceptance.

Under which condition is each most likely to be used is as follows:

Skimming pricing strategy is often used as a market entry price for distinctive product or services with low or no initial competition. When supply starts to exceed demand the beginning high price would be dropped.

Penetration pricing strategy is used when the product attains recognition in the market through customer sample purchase stimulated by its low price, marketers might raise the price to the level of competing goods.