Which pricing strategy charges high prices for innovative products initially and then lowers prices as novelty wears off?

Which pricing strategy charges high prices for innovative products initially and then lowers prices as novelty wears off?

• A. Skimming
• B. Penetration pricing
• C. Price leadership
• D. Competitive pricing

Answer: (A)

Skimming pricing is about charging a high price at launch to capture the segment with a high willingness to pay for something innovative or differentiated. As the novelty wears off and demand from early adopters fades, the price is gradually lowered to attract more price-sensitive customers. This approach helps recover heavy development and marketing costs upfront and preserves a premium image while eventually expanding the market. Penetration pricing would start low to gain quick market share, which isn’t the idea here. Price leadership and competitive pricing aren’t tied to the product’s lifecycle in the same way and don’t describe the strategy of starting high and then lowering prices as novelty fades.

Skimming pricing is about charging a high price at launch to capture the segment with a high willingness to pay for something innovative or differentiated. As the novelty wears off and demand from early adopters fades, the price is gradually lowered to attract more price-sensitive customers. This approach helps recover heavy development and marketing costs upfront and preserves a premium image while eventually expanding the market.

Penetration pricing would start low to gain quick market share, which isn’t the idea here. Price leadership and competitive pricing aren’t tied to the product’s lifecycle in the same way and don’t describe the strategy of starting high and then lowering prices as novelty fades.