Organizations can either utilize market-skimming pricing or market penetration pricing techniques when introducing the price of new products. Skimming pricing is a strategy where a company sets high initial prices for a product to attract buyers with a strong desire for the product; then, the prices are gradually reduced (Feng et al. 2). Skimming pricing is mainly used for updated technologies with different market demands and desirability layers. Alternatively, organizations can set lower initial pricing to attract more customers, share a taste of the product or service, and then gradually increase the price after gaining market recognition and building a customer base.
Samsung is a tech giant that utilizes a skimming pricing strategy when introducing its products. Price-skimming is used for technological products that need regular updating, and the newest versions attract the highest demand. Samsung Galaxy S21 is a product that had high customer expectations and experienced high initial fervor and hype wanes after launching. Later on, Samsung kept adjusting the price of the Samsung Galaxy S21 to suit other consumers in the market. The high up-front sales assist in technological research and development of products. The market-skimming strategy was effective since the company recorded high sales at the initial level price and other subsequent levels. However, market skimming price is only applicable for brands and products with a strong market presence; otherwise, they can lead to massive losses.
Disney plus is an example of an organization that utilizes market penetration pricing. Penetration pricing should differentiate the new product from the competitors’. When Disney plus decided to launch its streaming platform in 2019 and used penetration pricing to introduce an initial price of $6.99, significantly lower than the rival Netflix. The initial price was under the customer’s willingness to pay and attracted a lot of customers. After consumers tasted the product, Disney plus moderately normalized the prices. I think market penetration was effective for Disney Plus since it allowed product penetration despite the price to set the customer base.
Work Cited
Feng, Shuai, et al. “Pricing strategy for new products with presales.”Mathematical Problems in Engineering 2019 (2019).