To gain market share, firms set an initial price below the current rate to make their product more accessible. 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 . If you’re selling something that has mass appeal, it might make sense to opt for penetration pricing and still maintain 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.