Module8(fom) Dissertation Example | Topics and Well Written Essays - 250 words

Module8(fom) - Dissertation Example Price skimming occurs when the introductory price is relatively high reflecting that the IPad is innovative and there is a degree of â€Å"prestige or status† attached to owning the IPad (Pride, Hughes and Kapoor 2010, p. 336). Assuming that the targeted consumers care about prestige and status, and that the cost of research and development that went into developing the IPad is high, price skimming is useful for meeting the cost of development and the needs of the targeted consumers. It will also ensure that demand for the product will not outweigh supply if supply is relatively low. Penetration pricing however may not be desirable since it assumes that there is a high supply of the product and there is a low demand. This is assumed because penetration pricing is structured around low pricing with the objective of creating market shares for the new product. It is hoped that setting low prices will discourage rivals’ entry into the market (Pride, Hughes and Kapoor 2010, p. 336). This is an undesirable approach to the introduction of a new technologically driven product as the market is filled with these kinds of products and the only way to penetrate the market is to introduce something that is new and better.