During the introduction stage of the new-product life cycle, companies need to choose between two br

A market-skimming pricing strategy is used when companies that invent new products initially set high prices to "skim" revenues layer by layer from the market. Sony frequently uses this strategy. When they introduced the HDTV to the Japanese market in 1990, the sets cost $43,000. HDTVs in the U.S. now cost around $1,000. Market skimming makes sense when the quality and image of the product support the higher price and enough buyers want the product. Marketers must be able to keep competitors away from the market. Setting a low price for a new product in order to attract a large number of buyers and a large market share is called market-penetration pricing. For low-price strategy to work, the market must be highly price sensitive so that a low price produces more market growth. Production and distribution costs must fall as sales volume increases. Finally, the low price must keep out the competition, and the penetration price must maintain its low-price position. Dell and Wal-Mart have been successful with this strategy.

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