New Product Pricing Strategy?

Pricing strategy usually change a s the product passes through its life cycle..The introductory stage is especially challenging.Companies bringing out new product face the challenge of setting prices for the first time.They can choose between two broad strategies ..
Marketing Skimming Pricing
Market penetration Pricing
Marketing Skimming Pricing
Many companies that invent new products set high initial prices to skim revenues layer by layer from the market....Sony frequently uses this strategy called makert skimming pricing...When Sony introduced worlds first high-definition television to the japanese market ..the high touvh set cost 43000$.These television were only purchased by customer who really wnated the new technology & could offer to pay a high price for it.Sony rapdily reduced the price over the next several years to attract new buyers.By 1993,a 28 inch HdTv cost japanese buer cost over 6000.In 2001 , A Japanese consumer could buy a 40 inch HDTV for abour 2000$...A price that many more customer could afford.An entry level HDTV se t now sells for less than 500 in the U.S.A. and the prices continue to fall in this way sony skimmed the maximum amount of revenue from the various segments of the market.....
Market skimming makes sense only under certain conditions ..First , the products quality & image must support higher price and enough buyer must want the product at that price . Second , the cost of producing a smaller volume cannot be so high that they cancel the advantage of charging more ..finally, competitor should not be able to enter the market easily and under cut the high price...

Market penetration Pricing

Rather than setting a high initial price to skim of small but profitable market segment.Some companies use market penetration pricing,they set a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers and win a large market share..The high sales volume result in falling cost and allowing the company to cut their prices even further..For Example Dell use penetration pricing to enter the personal computer market selling high quality, computer products through lower cost direct channels.it,s sales soared when HP ,Apple and other competitor sell through retail stores could not match it,s prices.

Several conditions, must be met for this low price strategy to work .First the market must be higly price sensitive so that the low price produces more market growth.Second,production and distribution cost must fall as sale volume increase.Finally, the low prices must help kepp out the competition and the penetration .Pricer must maintain its low price positio n otherwise price advantage may b only temporary and destoyed..