Price Skimming vs Penetration Pricing
Launch high and lower prices over time, or launch low to grab market share?
By Iris Penhaligon | Oct 23, 2026 | 5 min
When launching new products, companies must decide on an initial price strategy.
Two common approaches sit at opposite ends.
I Price skimming
Launch at a high price to capture early adopters willing to pay more, then lower prices over time. Common in technology and electronics.
II Penetration pricing
Launch at a low price to attract customers quickly and build market share, then raise prices later. Common for streaming services, consumer goods, and new market entrants.
III Choosing
- — Skimming suits innovative products with little competition
- — Penetration suits markets with strong network effects or price-sensitive buyers
- — Both depend on brand strength and competitors
IV Risks
Skimming can annoy early buyers when prices drop. Penetration pricing can make raising prices difficult later.
V Real-world examples
Games consoles and smartphones often launch at high prices and get cheaper over time, a classic skimming pattern. Streaming services and delivery apps have often launched with low introductory prices or free trials and raised prices once they built a user base. Supermarkets entering new countries sometimes use aggressive low pricing to win customers. The strategy chosen often depends on competition and how quickly rivals can copy the product.
This is general educational information about economics, not financial, investment, or tax advice. Consult a qualified, licensed professional before making financial decisions.
Further reading
- 1. Drip Pricing: Hidden Fees Added Later
- 2. Charm Pricing vs Round Pricing: When Each Works
- 3. Why Prices End in .99