Price skimming helps businesses have better control over the pricing of their products. Price skimming helps businesses change the price on their products according to the market situation, brand perception, customer response, product features, and competition. Incorporate skimming into your pricing strategy only when you have enough repeat buyers to generate dependable word of mouth and assurance that you can’t be easily undercut.

Without high quality and brand image, price skimming can impede your progress more than it can help. One important point to note here is that price skimming is a pricing strategy used for products in the initial stage of the product life cycle. Companies like Apple benefit from high short-term profits during a product’s introduction, and the initial higher prices are justified by the technological breakthroughs they achieve. You may have noticed that Samsung drops the prices of its phones almost 2 to 3 months after their launch.Ĭharging the highest initial price during the launch of an innovative product, particularly in high-tech industries, can help your company recoup research and development costs as well as promotional expenses. On the other hand, bread companies like Kingsmill and Warburtons take advantage of economies of scale and cannot produce smaller quantities for low prices. The Swiss watchmaker Rolex can use price skimming as the unit cost of producing a small volume is almost the same as manufacturing higher volumes. Upon each new model’s release, the price is set high, and as the product’s lifecycle progresses, the price decreases. Apple is known for using price skimming as a launch strategy for its iPhone line of products. The company then lowers the product’s price when demand declines and the market becomes saturated.

Price skimming and penetration examples