In the simplest terms, price skimming can be defined as a strategy of selling a particular product at a high price when a new product is launched and its demand is quite inelastic. Price skimming is applied to gain a considerable amount of profit at the initial stage of the launch of a product. This helps a company to recover the amount it invested during the manufacturing of the product. Price skimming has its share of advantages and disadvantages. There are certain circumstances when this pricing strategy is best to apply. This article will enlighten you about all these aspects. Take a look at the following.
How can You Benefit from Price Skimming?
Price skimming can turn out to be helpful for your business in the following ways.
- This pricing strategy can trigger a great profit margin.
- If you decide to compete in a market where the longevity of a product is short, you can rely on price skimming to pick up the costs related to the development of the product.
- Price skimming helps dealers earn high profits as they can obtain high percentage if the product price is high.
- With this pricing strategy, you can create a super impressive image of your products provided you produce finest quality products to match with that image.