We’re going to address the latter in more detail in the next paragraph. Market pricing is also the most stable form of pricing, as skimming can work for a limited time, and penetration pricing too can work only within certain time restraints. In many cases brands charge aspirationally, connecting their products to competitors that they wish to compete against.Ĭustomers use pricing as a clear indicator of quality and prestige, so by simply charing as much as a luxury or brand you can position your brand unambiguously in your customer’s mind as a premium firm.Īt the same time, as discussed previously, after having recouped expenses you may be happy to lower your product’s price to increase market adoption, fully aware of the fact that your profit margin will be reduced (even though a higher sale volume will be beneficial for your revenue). It’s important to notice that market pricing is not settling for what everyone else is charging. The idea here is that you want to provide value to your customer in the form of “more for the same” instead of the “more for more” we just discussed in skimming. In market pricing, you are launching a product (or managing its campaign) by pricing your offer within the same price range as your competitors. That’s what we’re going to discuss next in market pricing. It is also important to remember that once the buzz of the new product has worn out, it may be helpful to think about how you can now lower the price point to make the product accessible or desirable to a broader audience of users.

If your brand has a strong following, then it can be worth taking advantage of this brand equity, to exploit the premium pricing you can charge above your competitor. If you have a strong and loyal following, chances are your fans will want to be the first to own your new collection, merchandise, or device.Īs a result, your customers may be happy to spend more money to acquire a product that has emotional or social value. Essentially, a firm has invested in the development of a new product and by charging a higher price, it can make the money back faster.Īnother reason why skimming can be a good launch strategy has to do with your brand’s equity. The reasons why newly launched products are initially very expensive may have to do with different reasons.įirst and foremost, at the moment of product launch, a company may need to recoup a lot of its investments connected to research and development. Skimming pricing refers to the strategy that brands adopt when launching products above the market price. With no further ado, let’s get into it! Skimming Pricing In this post, we’ll be looking at three fundamental strategies: skimming pricing, market pricing, and penetration pricing. Having said this it’s really important to identify the overall strategies you may want to adopt to achieve your goals. In this sense, it’s a good idea to remember that pricing can always be adjusted to reflect the response you’ll be collecting from your market. The first thing to consider, when making a pricing decision is that pricing is the only variable of the marketing mix that you can change almost in real-time.īy looking at the adoption curve of your product and at the response you are getting from your target audience you can use pricing dynamically to ignite a sense of scarcity or to sell all remaining inventory on a flash sale. Having said this, there is no need to worry. If you don’t get the pricing right, you may eat up your margins and be unprofitable even in the case of a successful launch.

The price is not just one part of your marketing mix (together with product, place, and promotion) but is the only component of your marketing mix which takes into account the return you are planning on making for your marketing campaign or product launch. When launching a product on the market, one of the most important decisions to make relates to deciding its price.

Penetration pricing example