What pricing strategy will be used to launch

(i) a high end smart phone

(ii) shampoo

(i) High-end smartphone — Skimming Pricing

A high-end smartphone is a distinctive premium product targeted at affluent consumers who value exclusivity and innovation. Skimming pricing is appropriate for such a product.

Under this strategy, a very high price is set initially to skim the cream of demand. The high price helps recover the heavy investment in research and development quickly. Since the demand is relatively inelastic in the early stages (for status-seeking and tech-enthusiast customers), high prices do not significantly affect sales. Later, as competition enters, the price may be reduced to tap other market segments.

(ii) Shampoo — Penetrating Pricing

Shampoo is a Fast Moving Consumer Good (FMCG) used by the masses. Penetrating pricing is appropriate for such a product.

Under this strategy, a low price is set initially so that the brand quickly becomes popular and maximises market share. Demand for shampoo is highly elastic — by reducing price, demand can be greatly increased. There is also strong competition in the shampoo market, so a low initial price helps restrict the entry of new firms and gain mass acceptance. For example, sachets of shampoo are sold at very low prices to capture the rural and middle-class market.