What is price skimming and penetration pricing ? What types of products will be most successful with penetration pricing?

 

• Skimming and Penetration Pricing Strategy - These are pricing strategies used by businesses to align their products in the market accordingly. Skimming pricing strategy entails the firm to set their initial price high in order to maximize profit (e.g. iPhone, PlayStation consoles). Meanwhile, the penetration pricing strategy permits companies to introduce their product or service at a low price to attract more customers and increase demand (e.g. McDonald's, Netflix).
• Penetration pricing is found more effective for businesses that offers food (i.e. fast food chains) or other essential products (i.e. marts or groceries). Since this type of pricing strategy encourages customers to buy more, while increasing market demand.

Step-by-step explanation

• Skimming and Penetration Pricing Strategy - Skimming pricing strategy entails the firm to set their initial price high in order to maximize profit (e.g. iPhone, PlayStation consoles). Meanwhile, the penetration pricing strategy permits companies to introduce their product or service at a low price to attract more customers and increase demand (e.g. McDonald's, Netflix).
• Penetration pricing is found more effective for businesses that offers food (i.e. fast food chains) or other essential products (i.e. marts or groceries). Since this type of pricing strategy encourages customers to buy more, while increasing market demand.