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# Market Skimming Pricing Strategy and Market Penetration Pricing Strategy Pricing is one of the most important decisions in marketing management because it directly affects sales volume, revenue, profitability, market share, and the positioning of a product. A firm must determine a suitable price after considering factors such as production cost, customer demand, competition, purchasing power, product characteristics, and marketing objectives. Two important pricing strategies used by firms for new products are the market skimming pricing strategy and the market penetration pricing strategy. These strategies differ mainly in their initial price level and the objectives they seek to achieve. Market skimming pricing strategy refers to a pricing approach in which a firm introduces a new product at a relatively high price and gradually reduces the price over time. The term “skimming” suggests taking the maximum possible revenue from different segments of the market by initially charging a high price to customers who are willing and able to pay more. As the product becomes established and competition increases, the firm may lower the price to attract more price-sensitive customers. The main objective of market skimming pricing is to recover the high costs associated with product development, research, innovation, and promotion at an early stage. It is particularly suitable for products that are technologically advanced, innovative, unique, or strongly differentiated from competing products. For example, when a new smartphone with advanced technology is introduced, the company may initially charge a high price. Customers who value innovation and are willing to pay a premium purchase the product first. Later, the company may reduce the price to attract customers who _________ _____ ______ ___ ___ ___ _______ __________ _______ ___ ________ ___.
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