1. Skimming pricing involves setting the highest initial price that customers really desiring the product are willing to pay when introducing a new product.
2. These customers:
- Are not very price sensitive.
- Weigh the new product's price, and quality against the same characteristics of substitutes.
- As consumer demand is satisfied, the firm lowers the price to attract another, more price-sensitive segment.
- Skimming pricing gets its name from skimming
successive layers of "cream," or customer segments, as prices are lowered in a series of steps.
3. Skimming pricing is an effective strategy when:
- Enough prospective customers are willing to buy the product at the high initial price to make these sales profitable.
- The high initial price will not attract competitors.
- Lowering price has only a minor effect on increasing the sales volume and reducing the unit costs.
- Customers interpret the high price as signifying
high quality.
4. These four conditions are most likely to exist when:
- Patents or copyrights protect the new product.
- Consumers understand and value the product's uniqueness.
Which pricing method sets the price of the product and what the customer is willing to pay?
What is a skimming price quizlet?
What factors are used to set a price when you use value based pricing quizlet?
Which term is the price the business charges a customer for a product?
Pricing vs. Cost | |
Pricing | Cost |
What the customer pays for a product or service | The investment a business makes in hopes of making a sale |
May or may not be tied to the cost of a product or service | Tied directly to the cost of investment |
Factors into a business's revenue | Factors into a business's cost of goods sold |