Price Penetration or Price Skimming?
QUESTIONS
1. What are the arguments for a price skimming approach, as outlined in the case?
2. What are the arguments for a price penetration approach, as outlined in the case?
3. Which pricing approach would you advise the firm to adopt? Why?
Price Penetration refers to the pricing strategy where new business entities known as entrants,
price their product with modest margins to supersede their competitors dealing in the same
goods.
Whereas Price skimming refers to that pricing strategy where products are priced at relatively
higher prices than usual and the ones priced by competitors, keeping in mind customers’ buying
patterns and their tendency to buy their product. This is done in order to enjoy premium pricing,
brand positioning, recovering advertisements and marketing costs.
1. Arguments for Price skimming approach
a. The first argument in support of price skimming for K-J would be that millions of dollars have
been spent by the company towards gaming console’s research and development,
