Question

A company launches a new product in the market with the following conditions:

1. The product is priced significantly higher than competitors.
2. The target market is affluent consumers who value exclusivity.
3. The product is heavily promoted as a luxury item.

Which pricing strategy is the company likely using?

Options

• Penetration Pricing

• Cost-Plus Pricing

• Skimming Pricing

• Parity Pricing

Answer 1

Skimming Pricing

Explanation:

The company employs a skimming pricing strategy, which entails introducing an item at a high initial price in order to attract affluent buyers who value prestige and exclusivity. This technique, supported by extensive promotion, portrays the product as a luxury asset, allowing the company to maximize profit margins from fewer price-sensitive market tiers before eventually decreasing the price or facing competition.