![]() ![]() This further helps to maintain inventory and also test the waters when venturing into newer markets or introducing newer products/services. By initially setting the price high, the businesses tend to filter out (read: segment) the market into different customer categories – early-adopters, brand loyalists, and regular consumers. This is a major benefit obtained from the proper implementation of price skimming. This also helps in recuperating advertising and marketing costs quickly. The higher initial price right from the launch helps recover the amount invested in the research and development of the product/service quite quickly and easily. Advantages of Price Skimming Recover Costs Quickly The price of the PS3 was then lowered every passing year and eventually reached $299 during the year was discontinued. But while the PS2 was conservatively priced, the company knew that there were lots of potential buyers for the PS3 and hence set a higher initial launch price. Take Sony’s PlayStation 3 console for example – it was initially launched at a price of $599 since it basically had no competition and was deemed to sell since their previous console, the PlayStation 2, was a huge hit. While Sony is well-known for its TVs and smartphones, we can observe price skimming strategy in action on their gaming console lineup. This is because the newly launched products usually have no competition or the brand is well-established in the minds of its users in order to warrant a lot of potential buyers for it. For example, tech companies usually use price skimming. Price skimming suits well for certain industries more than the others. The high number of prospective customers for the product.The product or service is new or revolutionary to the market.The business has a well-established brand and user base. ![]() ![]() Price skimming is used by businesses in case they meet either or all of the following situations – In simple terms, the business charges the highest price when the offering is launched and is new in the market, and then reduces the price over time. Price skimming aka skim pricing is a pricing strategy where businesses tend to markup the initial price of the product to a much higher rate and slowly decrease it as time goes on. ![]()
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