Asked by Nicholas Pride on Jul 12, 2024

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Why do marketers of new and innovative products often start out with a price skimming strategy rather than a penetration strategy?

Price Skimming Strategy

A pricing approach where a firm charges the highest initial price customers will pay and then lowers it over time.

Penetration Strategy

A marketing approach aimed at increasing market share for a product or service by entering the market with a low price.

Innovative Products

Products that introduce new features, functionalities, or technologies to meet emerging consumer needs or to open new markets.

  • Clarify the relationship between market scenarios, pricing schemes, and their influence on consumer decision-making and business financial performance.
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Pamyrjtha DesronvilJul 17, 2024
Final Answer :
In many markets, and particularly for new and innovative products or services, innovators and early adopters are willing to pay a higher price to obtain the new product or service. In this case firms would employ a price skimming strategy that sets the initial price high as opposed to a market penetration strategy that sets the initial price low. Firms employ skimming strategies to test consumers' price sensitivity. A firm that prices too high can always lower the price, but if the price is initially set too low, it is almost impossible to raise it without significant consumer resistance.