Price Skimming : Overview
✅ Meaning
Price skimming is a price setting strategy that a firm can employ when launching a product or service for the first time.
✅ How Apple Iphone has used this Strategy ?
Apple has added a twist to the skimming strategy. Rather than introducing their products at a high price and then lowering their prices later, Apple stakes out a price and then maintains and defends that price by significantly increasing the value of their products in future iterations.
✅ Advantages of Price Skimming
🕳️Perceived quality: Price skimming helps build a high-quality image and perception of the product.
🕳️Cost recuperation: It helps a firm quickly recover its costs of development.
🕳️High profitability: It generates a high profit margin for the company.
🕳️Vertical supply chain benefits: It helps distributors earn a higher percentage. The markup on a $500 product is far more substantial than on a $5 item.
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