Price skimming is a business strategy for pricing goods and services. When introduced to the market, the good or service is priced at a higher-than-usual price and then lowered incrementally over time.
The “skimming” refers to skimming off of customers willing to meet a specific price point. Once a customer segment is satisfied/saturated, that segment is “skimmed” off. The price is reduced, and the next segment of buyers is revealed.
In this article we will:
- Review pros and cons of using price skimming as a strategy
- Examine real-world examples of this strategy
- Explore businesses best or least suited to this type of business model