Production or marketing costs are unknown. This means you can set a high initial price and it will be difficult for competitors to enter the market or undercut you (if possible).Ĥ. When a business is unique enough to be protected it is considered to be proprietary. The offering is unique enough to be protected from competition by a patent, copyright, or trade secret. There are different price-market segments, thereby appealing first to buyers who have a higher range of acceptable prices.Īs the price over a period of time customers with a lower range of acceptable prices may start to purchase the businesses products or services.ģ. This means a higher price will consist of relatively similar demand.Ģ. Demand is likely to be price inelastic.Īs price changes, demand is unlikely to be heavily influenced. As seen in ‘Strategic Marketing Problems’ here is set criteria to consider before deciding to use this pricing strategy.ġ. This strategy suggests that the price of the offering should be set high initially and decrease incrementally over a period of time in order to speak to consumers at different levels of WTP. The price skimming strategy works best when a new product or service is being introduced to a market. These strategies will allow a firm to price their products or services at a sweet spot for their customer willingness to pay (WTP), or allow the firm to launch into a leading business in the market depending on a differentiating set of criteria. When a business is introducing a new product or service to the market the two best practices for pricing strategies are price skimming and penetration pricing strategies. Following these guidelines is a sure fire way to make sure you're on the right path! They will enable marketers to make better decisions when pricing new offerings. The difference between these two pricing strategies prove themselves to be an important part of the marketing mix.
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