Skimming Pricing

Skimming pricing is a pricing strategy commonly used by businesses when introducing new products, especially in the technology industry. The strategy involves setting high prices for a product initially and then gradually lowering them over time. The approach is used to maximize profits during the product's initial launch phase when demand is high and customers are willing to pay a premium price for a new and unique product. However, as time passes, competitors may enter the market or the product may become less unique, leading to a drop in demand. At this point, the business gradually lowers the price to attract more price-sensitive customers. An example of this strategy is Apple's pricing of its iPhones, where the company initially sets high prices for new models and then lowers them over time as older models become cheaper.