Advantages of Skimming Pricing
Skimming is a scheme in the business that entails giving a skyscraper high price to a product that takes only a short span of time. This is advantageous because those customers who are capable of paying these high prices can be skimmed.
Then, the price lowers subsequently when demand slows down.
In the business world, some strategies pertain to pricing the commodities in order to gain high revenue. One of these is the routine of skimming. This is a process wherein the prices of commodities are given elevated prices primarily when the products are fresh as well as in latest trend. The purpose is to skim these customers from those capable of paying and not. A number of customers are willing to pay for a product even though the price is very much expensive. This is the advantage of skimming. However, once the demand falls off, the prices of these commodities fall off in time.
Price Skimming: How Beneficial Is It?
The cost of the setting up of a product returns efficiently. This means that with the production of a new product, time and effort is consumed on researching as well as development. It is just proper to give high prices on the time it is up to the market initially. Moreover, promotional strategy to sell it and introduce to the market is costly too. Hence, skimming is the most advantageous way to gain the capital spent as well as acquire a good amount of revenue.
Image of the product is also very important. The way to boost it up is through the practice of skimming. Since the price of it is high, the consumers tend to believe that it is of good quality and that there is a necessity for them to purchase it. When the initial price of the product is elevated, the company acquires a sense of product security from the revenue that they got. The security means that they already have enough and there is nothing to lose anymore once the competition strikes up. If however the prices started low, certainly is will be difficult to charge high prices to the product unless there is a threat of impending shortage.
Skimming is also desirable for the businesspersons who are selling branded items. This gives the product a sense of prestige. Surely, the success of skimming with branded products is guaranteed. The underlying principle is that people will still buy the product because what they are after is the brand labeled to it. Nevertheless, skimming can also come in handy to the segments in the market. There are actually divisions in the market and these divisions come in different pricing strategies too. One can reduce the charges on the commodities at each segment.
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