Are You a Skimmer or a Penetrator?

Marketers have two basic choices for a launch strategy: try to blow the market open overnight or parse your resources and focus on building success gradually. Peter Fader calls these extremes “penetration” and “skim.” Fader, who is a professor of marketing at the Wharton School of the University of Pennsylvania, thinks all new product and service launch campaigns are grounded in one or the other.

ITSMA: Peter, explain the difference between a skim strategy and a penetration strategy.

Peter Fader: When you bring a new product or service to market, you have two basic choices. The first is to go slowly and deliberately and have all the customers line up from most desirous to least desirous and extract as much value as you can out of each one as you go down the line. That’s known as a skim strategy. As the word skim implies, it’s getting the richest, creamiest customers right off the top.

By contrast, a penetration strategy is where you try to blast the market open overnight. You get all the infrastructure in place, flip a switch, and boom, there it is.

Of course, that’s oversimplifying things a bit, but the value of looking at it this way is that you have two extremes. Because they are so diametrically opposite, you can use them as a filter for looking at what you’re doing. If you have a strategy that borrows elements from both extremes, then it’s often untenable because, in general, you either want to be focusing on one customer at a time or everybody all at once.

One of the problems I see with many new product and services launches is that the tactics are a mish-mash and therefore doomed to fail.

ITSMA: But what if some factors fall in the skim range and others fall under the penetration category? What do you do then?

Fader: In many cases, you have factors that push you one way and others that push you in the other direction. In such cases, I think having a clear example of each strategy can help you determine where to place yourself.

I like to use Viagra and Botox as cases because they are classic examples of each strategy. Take Botox. It clearly requires a skim strategy. It’s risky because it’s expensive, needles are involved, and you don’t want to overdo it. It’s made by a relatively small company with relatively limited resources (at least compared to Pfizer) that couldn’t afford to build the entire infrastructure overnight. I always ask people, can you identify the company that makes Botox? No one ever can. It’s interesting that the company [Allergan] just recently started national advertising, and still no one knows who they are.

Meanwhile, Viagra is the exact opposite—low-risk, high-repeat purchasing. You want to blast that market open and get there before everyone else does.

ITSMA: Let’s walk through how a campaign would look for these two different types of strategies in a B2B context.

Fader: Sure. For a skim strategy, it’s very much low key. You have customers who really want this thing and they are going to find it on their own. They are going to come to you. They have this well-identified, unmet need, and they are really looking for a product or service that could help them accomplish that goal.

So you really don’t have to do much. You just put the word out—let’s say at a trade show or something like that—and then they are going to line up outside your door.

Another big factor in a skim strategy is word of mouth. If you are dealing with an audience or market where there are very good social connections among people, all you have to do is whisper to one person, and the word spreads.

So back to Botox. People actually have Botox parties. It’s all word of mouth. There are no Viagra parties—that I’m aware of. So in that case, you have to push the market uptake process along faster as a marketer.

Same thing applies to B2B. There are some products and services where the message will just spread through the market on its own, and others where you need to shout it from the mountaintops.

Penetration is going to tend to have lower price, much more marketing support, and much more extensive distribution channels in place, as well as some distinct product characteristics: slightly less complexity, more compatibility with existing practices, easy to identify the benefits, and so on.

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