Costs play an important role in setting prices. But, Like everything else in marketing, good pricing starts with customer. COMPETITION´S Prices provide an orienting point. The firm must also take into account the Competitor´s costs, prices and possible price reactions. Thus, the firm can Decide whether it can charge more, the same or less than competitors. No matter What price the company charges, it must be certain to give customers superior Value for that Price. Given the customers´demand, the cost function and Competitors´ prices, the company is now ready to select a price. So, companies Select a pricing method that includes one or more of these three considerations. 1.Market-skimming pricing Many companies that invent new products set high Initial prices to “skim” revenues layer by layer. I.E.- iphone by Apple ($599; $499 ; $399…) Conditions: 1) the product quality and image must support the Higher cost; 2) enough low price sensitive consumers; 3) the costs of producing A smaller volume cannot be so high that they cancel the advantage of charging More; 4) competitors should not be able to enter the market easily. 2. Market-penetration strategy Companies set a low initial price to penetrate the Market quickly and deeply to attract a large number of buyers quickly and win a Large market share. I.E.. Ikea to boost its success in the Chinese market Conditions: 1) the market must be highly price sensitive; 2) production and Distribution costs must decrease as sales volumes increases; 3) the low price Must help keep out the competition (entry barrier).