Question
Price skimming is a pricing strategy where a high price is set for a new product and then gradually lowered over time. This strategy is used to maximize profitability by leveraging the willingness of customers to pay more for a new product. Initially, the product attracts less price-sensitive customers who are willing to pay a premium price for the novelty of the product. As the price is lowered over time, it attracts different types of customers who are more price-sensitive and have been waiting for the price to drop. This way, the company can tap into different segments of the market.
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Having a great product that delivers the right value to customers is a good starting point. But then what? At what price point should you sell the product for? And how do you scale and grow the product? There are five main types of pricing strategies that can be used for a new product. Premium pricing can be used to price a product above current market value to generate more revenue, while price skimming takes a high introductory price and lowers it over time. The less price-sensitive will buy first and other customers will buy-in later at a lower price. Penetration is used to enter the market with a lower price point and then attract as many customers as possible to later raise the price. Freemium provides a free version of a product with additional features that must be paid for, either with a paid version or from ad revenue. Promotional pricing provides temporarily lowered prices via flash sales or discounted entry offers that revert back to the original pricing after a set date. (...
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