New Product Pricing Strategy: Skimming Vs. Penetration

Abstract

Adopting a pricing strategy becomes crucial in the current high-competitive environment. Many pricing strategies were developed as a response to the market’s needs. Skimming pricing strategy and penetration pricing strategy are the most popular pricing strategy followed by companies for pricing a new product. Some circumstances and factors affect which one of these strategies should be adopted. Each type of these strategies has its merits and demerits. Gaining high profit in a short time and excellent customer’s perception of the product quality is the most advantage of skimming pricing. On the other hand, avoiding the threat of competitors and leading the market through the high diffusion of the product are the main pros of penetration pricing. The right decision taken to determine the suitable price means the success of the product, which in turn, the success of the company through achieving its objective. This study demonstrates the difference between the mentioned above (skimming and penetration) from different aspects. The theoretical literature review methodology was employed in this research to answer the following question: what is the optimal pricing strategy should the marketer/decision- maker follow to achieve the firm goals?