You may be able to leverage their must-have mentality.

Consumers in your target market are willing to pay a higher price.Ĭonduct market research and review your current customer base to learn more about potential price-insensitive early adopters in your market segment. What makes it difficult for competitors to emulate?ģ. How can you ensure that the product’s quality surpasses what’s currently available? How can customers use it in ways that truly make a difference in their lives? What makes it one-of-a-kind and the result of careful research and development? You are launching an innovative product.Īs with the Apple and Nike examples we explored earlier, you may be able to succeed with a price skimming model if you are launching a product that consumers perceive as innovative and an indispensable must-have. How might you market your products to price-insensitive early adopters?Ģ. Is your product among the first (if not the first) of its kind? Examine your industry and the market segments you are targeting for opportunities to introduce new products at an initial high price. Price skimming is generally not a viable strategy in a crowded market, as consumers will have their pick of comparable products at competitive prices. Your market is not (yet) crowded with competitors. These prices can last for several months before Nike lowers the cost to sell remaining inventory to price-sensitive customers.Īdvantages and disadvantages of skim pricingĪs you consider skim pricing for your business, consider this strategy’s advantages and disadvantages:ġ. Nike, an athletic apparel market leader, regularly introduces new designs at higher prices, relying on early adopters and loyal customers to purchase products at the introductory price. Segmenting customers as the price drops, according to what they are willing to pay for a new productīig brands like Apple and Nike tend to do well with price skimming and provide excellent price skimming examples to examine:Īpple periodically introduces new iPhones with the latest features at a high price, attracts price-insensitive customers who value having the latest device to hit stores, and then sells them at lower prices to price-sensitive customers as newer versions are introduced. Skim pricing is the opposite of penetration pricing, which prices newly launched products low to build a big customer base at the outset.īusinesses adopt a skim pricing model for several purposes, including: Skim pricing, also known as price skimming, is a pricing strategy that sets new product prices high and subsequently lowers them as competitors enter the market.

Penetration pricing meaning