This includes those who will purchase the product after the first drop in price and the price-conscious late adopters who will wait for the price to reach the lowest possible point before making a purchase.Īnother factor that influences a drop in pricing is the production of a newer model of the product or the production of a similar product by a rival company. Usually, as the product losses its novelty over time and sales begin to dip, the price also gets gradually reduced to attract other classes of customers.
However, this high price is not maintained all through the life cycle of the product or service. It additionally leverages the absence of similar products in the market to enjoy the maximum benefits of interest in the product or service to charge the highest possible price which can drive up revenue immediately. This strategy attracts early adopters of new products who are willing to pay a high price for them. Skimming pricing strategy is also known as price skimming, skim pricing, or skim-the-cream pricing strategy. The goal of the skimming pricing strategy is to increase sales while demand is high and competition is low. This is often done so that the initial investment in the production of the good or service can be easily recuperated within the shortest possible time. The price skimming strategy is a dynamic pricing strategy that involves charging the highest possible price that the market can tolerate for a new product or service. Read about: Navigating Economic Downturns: Strategies for Businesses to Survive and Thrive We shall also discuss some advantages and disadvantages of adopting this pricing strategy. In this article, we shall have a closer look at the skimming pricing strategy and practical examples of how it is implemented.
This strategy is often favored by technology companies due to its many benefits. The skimming pricing strategy is one of these pricing strategies that could be employed by a company when pricing its products or services.
In a bid to get a balance and choose the most effective price, companies often use different types of pricing strategies based on various existing factors such as competition, target market, and sales goals. It is also important that the price is not too low such that the business incurs losses instead of making a profit. When pricing, it is important that the price is not too high so that it does not discourage people from patronizing the brand. When is the skimming pricing strategy used?Īfter companies have produced a new good or service, it becomes necessary to put a price at which consumers can purchase such a product or service.Disadvantages of skimming pricing strategy.What are the benefits of skimming pricing?.
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