What is Price Skimming?

Business & Management
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#1

Skimming is a pricing strategy when the initial price of a newly launched product or service is set higher than the market price for similar offerings, and then gradually lowered to the equilibrium. Initially the product attracts early adopters and then as the price is lowered, reaches out to more price sensitive segments. Apple is a good example of a company following skimming strategy.

#2

Price skimming strategy is a pricing strategy where marketer set a relatively high initial price for product and service at first and later switch to lower price over time.

The Condition to meet skimming strategy is:

  1. Product,Quality and Image must support higher price & where buyer want that product at higher price.

  2. Cost of producing smaller volume can not be so high that they cancel advantage of charging more.

  3. Competition should not enter market easily and UNDERCUT higher price.