What is skimming pricing and can you give me some examples?

What is skimming pricing and can you give me some examples?

Skimming pricing is a strategy where a company sets a high price for a new product initially and then lowers it over time. This approach is often used for innovative products. For example, when a new smartphone is released, it may be priced high to maximize profits from early adopters.

Can you give me more examples of products that use skimming pricing?

Sure! Other examples include video game consoles, luxury cars, and high-end electronics. These products often start at a premium price to attract enthusiasts and then gradually decrease as competition increases.

What are the advantages and disadvantages of skimming pricing?

The advantages include maximizing profits from early adopters and recovering development costs quickly. However, disadvantages can be losing market share to competitors and potentially alienating price-sensitive customers.

Is skimming pricing effective in all markets?

Not necessarily. Skimming pricing is most effective in markets with less competition and where consumers are willing to pay a premium for new products. In highly competitive markets, it may not be as successful.