Question

Discuss one of the pricing strategies examined in the textbook including details of how it is implemented within an organization. What type of business or industry might use this strategy? Provide a real-life example of a company that might utilize this strategy.

Answer 1

I will talk about skimming price strategy.

Skimming pricing strategy is implemented by those companies which has high brand recognition and value in th market. In this pricing strategy when the product is launched the company sets the price very high. This is done to focus the early adopters’ customers. The loyal customers who wait for the product to get launched. The moment the product is launches the early adopters buy the product at very high price as the product is new in the market. By this way the company earn huge margin. Later at the product gets old and there are alternatives in the market the company keeps on reducing the price. By this way the mass customer buys the product due to the affordability. By this way the company gets customers from each the customer segment.

For an example While pricing the Apple I phones the company uses this strategy. In initial period of time the price of the product is very high but later on the price of the product is reduced.

Generally this strategy is used for lifestyle products and the companies which focus on the innovation use it.

While implementing this start the company should keep in mind that it should have a good brand value in the market. The innovation should be there in the product for skimming pricing otherwise alternatives are available at the cheaper prices.