Price skimming

• Price skimming aims to maximize profit when a new product is first launched into the market
• Price skimming involves setting a high price initially to target consumers willing to pay any amount to be the first to buy a new product.
• Steps in the price skimming strategy

  1️⃣ Segment the market based on behavioral and income factors

  2️⃣ Charge a high initial price to early adopters

  3️⃣ Skim off initial revenues and profits

  4️⃣ Lower the price to attract a wider audience
• Early adopters are willing to pay a high price to own a new product that creates excitement and demand
• Electronic items and technology sectors are common examples of industries using price skimming.
• Which company is widely recognized as a key example of price skimming?

  Apple
• Price skimming works in all market conditions without any specific requirements.

  False
• For price skimming to succeed, the product must have a high quality
• Creating scarcity around a product can encourage early adopters to pay a higher price.
• Competitors must be deterred from entering the market with a lower price
• Match the market condition with its importance for price skimming:

  High-quality product ↔️ Customers willing to pay more

  Well-established brand image ↔️ Builds trust and value

  Limited competition ↔️ Prevents undercutting