market skimming pricing vs market penetration

#MARKET SKIMMING PRICING VS MARKET PENETRATION TRIAL#

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.

#MARKET SKIMMING PRICING VS MARKET PENETRATION 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

Further, it’s logical to opt for penetrating price when the product demand is elastic whereas skimming is done when the product demand is inelastic, and the customers are willing to pay high prices.įive elements of FS. However, once the competitors start producing same products or services, the prices are decreased to retain the customers. The profit is earned by taking first mover advantage. On the other hand, skimming pricing is adopted by setting high prices from the start to get high profit margins. When the customer accepts the product, overall demand for the products/services increases. Penetrating pricing is done by setting low prices initially to increase customer demand and to get market share. Let’s understand the difference between market penetration and market skimming price. These terms are used for the products and services in the market. Market penetration and market skimming price are well known terms in the field of finance and economics.

Market skimming pricing vs market penetration