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Price skimming and penetration pricing are both strategies used to maximize profit margins, but they approach this goal in different ways. Price skimming involves setting a high initial price for a new product, then gradually lowering the price over time. This strategy aims to maximize profits by targeting early adopters who are willing to pay a premium for the latest products. On the other hand, penetration pricing involves setting a low initial price to attract a large number of customers and gain market share quickly. The price may then be increased once a significant market share has been achieved. While price skimming can lead to high profit margins in the short term, penetration pricing can lead to higher total profits in the long term by building a larger customer base.
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Need to improve your product pricing to maximize your profit margin? This Pricing Strategies Toolbox includes some of the most useful and common prici...
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With the pricing strategy comparison, GoPro could have tested its price skimming strategy against a price penetration strategy. In a parallel universe where GoPro launched the product with the lower price first, perhaps they could have sold a lot more units and then increased the price over time. Check out the explainer video to see these tools in action.
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