Definition

Kotler & Keller define market-skimming pricing as “setting a high price to maximize margins from early adopters before gradually lowering it,” and penetration pricing as “setting a low price to gain rapid market share.”

Introduction

Two opposite entry tactics—skim cream off the top or dive deep for volume. Skimming builds prestige; penetration builds reach.

Explanation

Market Skimming

High price → high margin per unit.

Works for innovative or luxury products.

Targets less price-sensitive early adopters.

Penetration Pricing

Low price → fast adoption.

Builds economies of scale.

Works in competitive, price-sensitive markets.

Key Takeaways

Skimming suits innovation; penetration suits mass markets.

Wrong strategy can destroy profitability or positioning.

Timing of price reduction is critical in skimming.

Real-World Case

Apple iPhone launches high (skimming), while Xiaomi enters with aggressive low pricing (penetration).
References: https://www.apple.com
, https://www.mi.com