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Penetration Pricing:
Definition: Penetration pricing involves setting a relatively low initial price for a new product or service to quickly gain market share.Example: Airlines frequently use dynamic pricing for ticket sales.Example: When Sony introduced its PlayStation gaming console in the mid-1990s, it used penetration pricing to disrupt the gaming market dominated by Nintendo and Sega.Sony priced the PlayStation significantly lower than its competitors to attract gamers, quickly gaining market share.Price Skimming:
Definition: Price skimming involves setting a high initial price for a new product or service and then gradually lowering it over time as competition increases or as the product matures.Dynamic Pricing:
Definition: Dynamic pricing involves adjusting prices in real-time based on various factors such as demand, competition, and market conditions.The prices of airline tickets can vary widely based on factors such as demand, time until departure, seat availability, and even browsing history.
Penetration Pricing:
Definition: Penetration pricing involves setting a relatively low initial price for a new product or service to quickly gain market share. Over time, the price may increase as the product becomes more established.
Example: When Sony introduced its PlayStation gaming console in the mid-1990s, it used penetration pricing to disrupt the gaming market dominated by Nintendo and Sega. Sony priced the PlayStation significantly lower than its competitors to attract gamers, quickly gaining market share. As the PlayStation became more popular, Sony gradually increased the price and expanded its profitability.
Price Skimming:
Definition: Price skimming involves setting a high initial price for a new product or service and then gradually lowering it over time as competition increases or as the product matures.
Example: Apple often uses price skimming for its new iPhone releases. When a new iPhone model is launched, it typically enters the market with a premium price, attracting early adopters and customers willing to pay a premium for the latest technology. Over time, as demand stabilizes and competitors introduce their own offerings, Apple lowers the price of the iPhone to appeal to a broader market segment.
Dynamic Pricing:
Definition: Dynamic pricing involves adjusting prices in real-time based on various factors such as demand, competition, and market conditions. This strategy allows companies to optimize revenue and respond quickly to changes in the market.
Example: Airlines frequently use dynamic pricing for ticket sales. The prices of airline tickets can vary widely based on factors such as demand, time until departure, seat availability, and even browsing history. For example, if a particular flight is in high demand or has limited seats remaining, the airline may increase prices to capitalize on that demand. Conversely, prices may decrease if demand is low or if there is a need to fill remaining seats closer to the departure date.
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