Handbag retailer, Kate Spade, has an entire sale section on their website where they display the original price of the product and its new lower price. Retail and ecommerce: Retailers or ecommerce companies often start with a high initial price, but then roll out sales and other steep discounts to appeal to their price-sensitive segment of customers.They capture a small number of innovators and early adopters upfront, hit their sales peak at mid-market, and then drop off again when the price is lowered further. Other technology companies like Samsung and Google have also used this strategy. The iPod classic was priced at $399 in 2002 and was decreased to $299 about one year later. It’s a strategy they’ve used with everything from iPhones to iPods. Technology: Apple is perhaps one of the notorious examples of price skimming.Here are some real-life examples of where this pricing strategy :

When a company has attracted as many sales as possible and starts seeing its numbers decrease, it progressively lowers the product price to capture the rest of the market.Īs a result, price skimming effectively works around all phases of a product’s life cycle to maximize profitability. Price skimming takes advantage of this period, essentially “skimming” off the top, and setting the highest price possible without completely alienating their target market. In many cases, especially in fast-moving industries, there may also not be much competition at the time of launch. Consumers may be willing to purchase solely out of curiosity or to be ahead of the curve. Immediately after a new release, products are usually at the peak of the market’s attention. Price skimming works by taking advantage of the initial high consumer interest when a product has just launched.

Price skimming and penetration pricing