Pricing strategy used by television company, Skimming or penetration pricing

1. PRICING STRATEGY FOR
TELEVISION COMPANY
JISHA VARGHESE
S2 MBA
Mar Athanasios College For Advanced Studies Thiruvalla (MACFAST)
Kerala, India
www.macfast.org

2. WHAT IS PRICE?
The amount of money expected, required or given in payment for
something. Pricing method is used to set the price of producer's offerings
relevant to both the producer and the customer.

3. Pricing Strategy
A business can use a variety of pricing strategies when selling a product
or service. The price can be set to maximize profitability for each unit
sold or from the market overall. It can be used to defend an existing
market from new entrants, to increase market share within a market or
to enter a new market.

4. Penetration Pricing
 It is a pricing technique of setting a relatively low initial entry price,
often lower than the eventual market price, to attract new customers.
 The strategy works on expectation that customers will switch to the
new brand because of the lower price.
 Penetration pricing is most commonly associated with a marketing
objective of increasing market share or sales volume, rather than to
make profit in the short term.

5. Skimming pricing
 It is a pricing strategy in which companies adopt when they launch a new
product,.
 In this strategy while launching a product company set high prices for a
product initially and then reduce the price as time passes by so as to
recover cost of product quickly.
 The entire profit of price skimming is to generate an outsized profit
margin.
 It entails fixing a high price for the new product before other competitors
step in to the market.

6. Skimming VS Penetration Pricing
Skimming
• Setting a high price at launch
• Used for innovative products
with little or no competition
• High profit margin allows
recovery of development costs
• Over time price is lowered to
extend sales to new segments.
Penetration
• Setting a low price to establish a
significant market share
• Used when trying to break into an
existing market
• Raise price as the firm becomes
established.

7. Pricing Strategy for Television company….

8. Q) As the president of a new high definition television company, you must decide
between a penetration or skimming pricing policy. Explain the factors you would
consider in making your choice.
For the above mentioned question, I would go with price skimming method as it’s the
best choice for a new product entry. Best choice for an innovative kind of product.
We will be able to “skim the cream off the market” by initial high price. Later on, the
mass market can be tapped by lowering the price. If there are doubts about the shape of
the demand curve for a given product and the initial price is found to be too high, price
may be slashed. However, it is very difficult to start low and then raise the price. Raising
a low price may annoy potential customers.

9. Factors for choosing Skimming pricing are
• The price will be at the top of the demand curve.
• Price Elasticity is low.
• Cross elasticity is also low.
• Absence of close substitute in initial stage will help reap profits.

10. CONCLUSION
 As a president of a high definition television company it is better to
choose skimming pricing policy.
 Price skimming helps to build a high- quality image and perception of
the product.
 It helps a firm quickly recover it’s cost of development.
 It helps to generate a high profit margin for the company.