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It is important to note that there are a number of different pricing strategies which differ in their strategic objectives. The skimming price strategy enters the market by offering the highest price for a product, which is subsequently lowered as needed. Such an approach is useful in order to maximize revenue and control the demand in a high-demand market. A specific example would be iPhone or other Apple products, where products are offered at a market with high prices. The main goal is to avoid a loss of revenue and control demand. As soon as the demand is satisfied, a company can choose to lower its price or offer an alternative but similar product for price-sensitive segments. Therefore, a skimming price strategy allows a business to have control over demand and be able to avoid potential revenue losses from incorrect products valuation risks.
When it comes to the penetration pricing strategy, the lowest price is offered to the market with a subsequent increase in pricing. The strategy is highly useful to attract as many customers as possible at the beginning, which is plausible in a market where there is a high saturation of suppliers or competitors. A prime example of this approach is Netflix, which entered the market with the lowest prices in order to attract as many viewers and subscribers as possible. The platform even used a free trial measure, which is the most extreme case of penetration pricing. This was useful for Netflix since it was capable of handling high demand influx due to its internet-based business format, and the market was already saturated with other competitors. Therefore, the company was able to successfully penetrate the market with the lowest prices and subsequently increased the subscription fee to maximize revenue later.
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