SKIMMING PRICE Meaning and
Definition
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Skimming price refers to a pricing strategy used by businesses to initially set a high price for a new product or service in order to maximize profits in the early stages of its release. The term "skimming" alludes to the concept of quickly capturing the cream or top layer of the market, specifically targeting those customers who are willing to pay a premium price for the novelty or exclusivity of the product.
With skimming pricing, companies aim to leverage customer curiosity, perceived value, and limited competition to generate substantial profits. This strategy is commonly employed when introducing technologically advanced products or innovative offerings to the market. By setting a high price initially, businesses can recover their research and development costs quickly before competitors enter the market or imitate the product.
Skimming price is often associated with relatively inelastic demand, meaning that customers are less price-sensitive and more focused on acquiring the latest and best product available. As demand decreases or competitors enter the market, the company may gradually lower the price to attract a wider customer base, enabling them to maintain sales and extend product longevity.
While skimming pricing can be advantageous for generating early revenue and obtaining a competitive advantage, it also carries risks. Consumers may perceive the high price as unjustified, leading to hesitance in purchasing the product. Furthermore, as competitors enter with lower-priced alternatives, the company may face challenges in maintaining market share. Therefore, businesses need to carefully analyze market conditions, customer preferences, and the potential for long-term demand before implementing a skimming pricing strategy.
Common Misspellings for SKIMMING PRICE
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Etymology of SKIMMING PRICE
The term "skimming price" does not have a specific etymology because it is a combination of two individual words that have their own origins. However, we can look at the origins of each word separately:
1. Skimming: Of Dutch origin, the word "skimming" comes from the Dutch word "schimmen", which means "to skim or remove". It was originally used in the context of removing floating material from the surface of a liquid. Over time, the meaning expanded to include the concept of quickly and lightly glancing over something or taking only the most valuable part. In the context of pricing, "skimming" refers to setting a high initial price for a product or service to target the segment of the market willing to pay a premium.
2. Price: The word "price" has a Middle English origin derived from the Old French word "pris", which means "value" or "worth".
