Define the pricing of a new product

Question

Define the pricing of a new product.

Answer 1

Methods and strategy:

Under pricing a new product, usually two kinds of strategies are suggested. They are as follows:

1. Skimming price strategy:

It is done with a fundamental idea of gaining a premium by those buyers who always ready to pay a much higher price than others. Therefore a product is priced at a very high level because of incurring large promotional expenses in the previous stages. Therefore skimming price refers to the high initial price charged while a new product is introduced within the market.

2. Penetration price strategy:

It is the practice of charging a low price right from the starting to stimulate the growth of the market and to imprison large share of this. Because the price is lower, the product quickly penetrates the market, and consumers along with low income are capable to purchase this.