Price Skimming


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Price Skimming

The practice of a company offering a new product and charging a high price at first, but gradually reducing it before competitors begin to sell similar products. For example, a company may offer a new product at $40 per unit, then in six months reduce the price to $35, to $30 in another six months, and so forth. Price skimming allows the company to recover its sunk costs (such as research and development) while still remaining competitive when other companies begin to offer substantially the same product. It is also called a high price strategy.
References in periodicals archive ?
In the US, price skimming is the most frequently used strategy in the medical device market, but market segmentation should be used to assess if other strategies, such as penetration pricing, would be more apt in particular sectors.