Market Skimming Pricing: The word skimming means “ Being on the surface”.
Setting a high price for a new product to “skim” revenues layer-by-layer from those willing to pay the high price.
Company makes fewer, but more profitable sales.
Market Skimming Pricing: Example:
Market Penetration Pricing: The word penetration means “Going within the Market”
Setting a low initial price in order to “penetrate” the market quickly and deeply.
Can attract a large number of buyers quickly and win a large market share.
It may be useful if the product will launch into a new market.
Market Penetration Pricing: To quickly penetrate the market, the company launches the product at relatively low price (P1), expecting to sell quantity Q1, and generate revenues equal to P1 times Q1 (the area of the shaded box). The penetration strategy capitalizes on the downward sloping demand curve since the company can pick the price and, within some reasonable bounds, optimize the resulting short-run sales quantity
Price Adjustment Strategies: Psychological pricing: Considers the psychology of prices and not simply the economics. Consumers usually perceive higher-priced products as having higher quality. Consumers use price less when they can judge the quality of a product by examining it or recalling experiences.
Price Adjustment Strategies: Dynamic pricing: Adjusting prices continually to meet the characteristics and needs of individual customers and situations. International pricing: Adjusting prices for international markets requires consideration of many factors. (For e.g.: Food Industry )