Describe a skimming price and a penetration price, and advise them whether they should charge a skimming price or a penetration price, with supportive reasoning for and against each pricing alternative.

A skimming price is a pricing strategy where the product is initially priced at a high point in order to capture maximum profit from early adopters. This approach can be beneficial for companies who want to turn a quick profit, particularly for one-off products or ones with limited appeal. It can also be useful when trying to build brand recognition and attract luxury buyers.

Meanwhile, penetration pricing involves setting an initial price that is lower than the market rate in order to gain traction by making the product accessible to as many people as possible. This technique allows firms to quickly expand their customer base, develop loyalty & create competitive advantages – all of which might not have been possible using higher prices .

When deciding between skimming & penetration , it ultimately comes down to the type of product/service being offered & objectives behind its development . For example , if you are selling something which has potential mass appeal then it could make sense opt for more affordable option via penetration pricing while still maintaining reasonable margins . On other hand , if you’re dealing with unique/luxury goods then going with higher prices may serve better since there will likely be less competition and customers willing pay premium for such items anyway.

Ultimately it ‘s important understand both strategies so appropriate decisions can be made based on individual needs & circumstances . With clear goals set out from start – along side careful consideration given towards target audience expectations – devising effective plans becomes much simpler ensuring successful outcomes over long-term.