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The Price Skimming Strategy

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Price Skimming is a common pricing strategy used for new products. Employing price skimming involves setting a high initial price, which helps a business recover the costs associated with developing and marketing the product. Although price skimming can be used in a variety of industries, it's commonly seen in consumer electronics, including: smartphones, video game consoles, and tablet computers. Learn more about price skimming, and the conditions that need to exist for this pricing strategy to be effective, in this video. Go Premium for only $9.99 a year and access exclusive ad-free videos from Alanis Business Academy: http://bit.ly/1Iervwb View additional videos from Alanis Business Academy and interact with us on our social media pages: YouTube Channel: http://bit.ly/1kkvZoO Website: http://bit.ly/1ccT2QA Facebook: http://on.fb.me/1cpuBhW Twitter: http://bit.ly/1bY2WFA Google+: http://bit.ly/1kX7s6P
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Text Comments (3)
Suhas Deshpande (1 year ago)
good information
Harry Paintsil (1 year ago)
I'm confused, Can a product be price elastic even if it is a new product in a market and the only such product in its category, such that consumers do not want to purchase it at it's initial high price skimming price? If so, could you please give an example?
Leon Kee (1 year ago)
IMO, price elasticity is subjective to the purchasing customers and thus, the situation you mentioned is still possible even if it's a monopoly. A product can appeal to different customer segments, and depending on their economic backgrounds, one can be relatively more price sensitive than the other. Price sensitivity (and hence, price elasticity) is also affected by other factors such as the product being a consumer staple vs. discretionary, price level (imagine the percentage of your income spent on the product), or economic utility of the product and how the pricing is being justified by that.

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