Penetration pricing strategies

Penetration pricing strategies .-
This pricing strategy is also applicable to new products but the opposite of skimming pricing. According to Kotler, Armstrong, Camera and Cruz, to set an initial price for a low market penetration quickly and efficiently, ie to quickly attract a large number of consumers and gain a large market share. The high turnover reduces production costs, allowing the company to lower prices further.
A classic example of this type of pricing strategy in the case of Dell, which entered the market for personal computers with low prices, distributing its products through direct channels to reduce their level of costs.
The penetration pricing strategy has as main objectives: to immediately penetrate the mass market, generate a substantial volume of sales, achieving a large market share goal, to discourage other companies from introducing competing products and attract new customers and additional customers that are sensitive to price. ¡Business are business!
This pricing strategy is appropriate when: 1) The market size is large and demand is elastic to price, 2) costs of production and distribution can be reduced with increasing sales volume, 3) there is already fierce competition in the market for that product or is expected to be submitted shortly after the introduction of the product.

The pricing strategy has several purposes

The pricing strategy has several purposes including: providing healthy margins of utility (to recover costs of research and development), connote high quality, restrict the demand to levels that do not exceed the production capacity of the company, provide flexibility to the company (because it is much easier to lower a price that meets the consumer’s resistance to upload if it proved too low to cover costs).
On the other hand, skim or skimmed price should be under the following conditions:
When the product offers a genuine benefit and to attract new buyers and for which they are willing to pay.
When the number of potential customers willing to buy the product immediately to the initial rate is high enough for these sales are profitable.
When the product is protected from competition for one or more barriers to entry, such as a patent.
When demand is fairly inelastic, which tends to occur in the early stages of the life cycle of a product.
When customers interpreted as indicating the high price of equally high quality.
¡Business are business!

What are the main pricing strategies?

What are the main pricing strategies?
According to various experts in marketing, the main or most commonly used pricing strategies are:
Price skimming strategy.
According to Stanton, Etzel and Walker, put a relatively high initial price for a new product is called skimming price allocation in the market. Ordinarily, the price is high in relation to the expected price range of the target market. That is, the price is set at the highest level possible that consumers will pay more interest for the new product.
Complementing the above, according to Lamb, Hair and McDaniel, the term skimming price is derived from the phrase “remove the cream from the surface” and denotes a high price relative to prices of competitive products … Under a product advances through its life cycle, the company can reduce its price to arrive successfully at larger market segments.
Then, a strategy of price skimming skimming or to set a high initial price for a new product to be purchased by those buyers who really want the product and have the financial ability to do so. Once satisfied the demand for this segment and / or as the product advances through its life cycle, it reduces the price to build other segments most sensitive to price. ¡Business are business!

What is a pricing strategy?

What is a pricing strategy?
According to Lamb, Hair, and McDaniel, a pricing strategy is a framework for pricing long-term basic sets the initial price for a product and the proposed direction for price movements throughout the product lifecycle:
Complementing this definition, it is noteworthy that according to Geoffrey Randall, the general policy of pricing a business is a strategic decision: it has long term implications, must be developed with great care and can not be changed easily. It is part of the overall positioning strategy. ¡Business are business!
So, in other words, a pricing strategy is a set of principles, pathways, guidelines and fundamental limits for pricing and throughout the product lifecycle, which is to achieve the objectives pursued with the price, while maintaining as part of the overall positioning strategy.

The choice of an appropriate pricing strategy

The choice of an appropriate pricing strategy is a crucial step in the ‘pricing process’ because it sets limits and guidelines for: 1) setting the initial price and 2) the prices that were set along iran lifecycle of the product, which aims at achieving the objectives pursued with the price.
It is therefore imperative that experts in the market have a good knowledge about what is a pricing strategy and what are the main options to be considered when designing such a strategy.
Now, taking into account the above, this article provides the answer to two basic but essential questions: 1) What is a pricing strategy? and 2) what are the main or most commonly used pricing strategies?