Describe the difference between penetration pricing and skimming pricing. Give an example of each to illustrate

your answer.

Penetration pricing: This strategy for pricing new products aims to capture as much
of the market as possible through rock-bottom prices. Each individual sale typically
yields a tiny profit; the real money comes from the sheer volume of sales. A key
benefit of this strategy is that it tends to discourage competitors, who may be scared
off by the slim margins. But penetration pricing only makes sense in categories that
don't have a significant group of consumers who would be willing to pay a premium
price. An example would be JetBlue Airlines.
Skimming pricing: This strategy for pricing new products is a subset of prestige
pricing. Skimming pricing involves offering new products at a premium price. The idea
is to entice price insensitive consumers—music fanatics, for example—to buy high
when a product first enters the market. Once these customers have made their
purchases, marketers will often introduce lower-priced versions of the same product
to capture the bottom of the market. Examples might include Apple's iPhone or iPod
market introductions.