PENETRATION VS SKIMMING PRICE PLUS

In response to this perennial marketing challenge, the marketing literature has formulated two fundamental marketing strategies, skimming and penetration pricing (e.g., Kotler and Armstrong 2012, p. On the other hand, a price set too high might harm the take-off and diffusion of the new product (Golder and Tellis 2004), limit gains from experience effects, hinder the product from reaching critical mass or necessitate embarrassing price cuts. On one hand, if the price is set too low, a company not only gives up potential revenues but also sets a perception of low quality for this new product, which can make future price increases difficult (Marn et al. In this environment, the pricing of new products is a difficult and critical task affecting the financial success of the product and the company. The current market environment, especially for hightech categories, is characterized by rapid introductions of new products. Published online in Articles in Advance December 18, 2014. History: Received: Januaccepted: OctoPreyas Desai served as the editor-in-chief and Christophe van den Bulte served as associate editor for this article. Keywords: price penetration price skimming dynamic pricing strategy product life cycle consumer durables brand competition The authors discuss managerial implications. The specific pricing paths correlate with market, firm, and brand characteristics such as competitive intensity, market pioneering, brand reputation, and experience effects. Firms exhibit a mix of these pricing paths across their portfolios. Penetration pricing launches the new product 18% below the market price and subsequently lowers the price relative to the market price. Skimming pricing launches the new product 16% above the market price and subsequently increases the price relative to the market price. In particular, the authors find five patterns: skimming (20% frequency), penetration (20% frequency), and three variants of market-pricing patterns (60% frequency), where new products are launched at market prices. The authors find that, despite numerous recommendations in the literature for skimming or penetration pricing, market pricing dominates in practice. The authors develop a method to classify dynamic pricing strategies and analyze the choice and correlates of observed pricing paths in the introduction and early growth phase of this market. This study seeks to analyze dynamic pricing paths in a highly complex branded market, consisting of 663 products under 79 brand names of digital cameras.

PENETRATION VS SKIMMING PRICE PLUS

Current complex dynamic markets are characterized by numerous brands, each with multiple products and price points, and differentiated on a variety of product attributes plus a large number of new product introductions.

Penetration vs skimming price