evaluate two different pricing strategies which a consumers goods manufacturer might adept??

Question

the question is 4 business AS level>>>

Answer 1

Skim pricing attempts to "skim the cream" off the top of the market by setting a high price and selling to those customers who are less price sensitive. Skimming is a strategy used to pursue the objective of profit margin maximization.

Skimming is most appropriate when:

Demand is expected to be relatively inelastic; that is, the customers are not highly price sensitive.

Large cost savings are not expected at high volumes, or it is difficult to predict the cost savings that would be achieved at high volume.

The company does not have the resources to finance the large capital expenditures necessary for high volume production with initially low profit margins.

Penetration pricing pursues the objective of quantity maximization by means of a low price. It is most appropriate when:

Demand is expected to be highly elastic; that is, customers are price sensitive and the quantity demanded will increase significantly as price declines.

Large decreases in cost are expected as cumulative volume increases.

The product is of the nature of something that can gain mass appeal fairly quickly.

There is a threat of impending competition.