ABSTRACT
Setting a pricing strategy for a particular product in any specific market is a critical marketing decision for any company and depends upon many factors, but most importantly the pricing strategy must be linked to the corporate objectives. These corporate objectives should, as mentioned in Chapters 6 and 7, be as specific as possible and are required for each product and each market if specific and relevant pricing strategies are to be developed. Generically pricing strategies, particularly for new products, can be described as ‘penetration pricing’ or ‘skimming pricing’ but these generic labels hide a multitude of possible alternatives. Penetration pricing is a strategy of low pricing as a means of developing market share and is therefore most appropriate during the growth phases of the product life cycle when it is important for a company to maximize its share in readiness for the period of maturity when profits and cash inflows will be the more important objectives. Skimming pricing is a strategy of extracting profit from the product, even at the expense of market share, and can therefore logically be applied during the latter stages of the maturity phase of the product life cycle, although strangely it is also advocated as a launch strategy prior to competitors entering the market.
