Post by account_disabled on Sept 16, 2023 3:25:03 GMT -5
Benefits of the Price Skimming Strategy include:
Maximize initial profits: Price Skimming allows businesses to earn high profits from customers willing to pay the highest prices. According to a report by McKinsey & Company, in 2017, this strategy helped a leading technology company increase revenue from $100 million to $500 million in just 18 months.
Skimming pricing strategy brings many benefits to businesses
Skimming pricing strategy brings many benefits to businesses
Building a premium and valuable image: Applying a price skimming strategy allows businesses to build a premium image for their products or services, creating an impression and creating special value. For example, Apple company used this strategy for their first iPhone in 2007, setting a higher starting price than competing products. This helped create a feeling of premium and unique product, and the iPhone became one of the most successful products in the history of technology.
Focus on customers who are willing to pay high prices: Price skimming strategy allows businesses to focus on the group of customers willing to pay the highest prices. According to a study by Nielsen, in 2016, customers who paid high prices were often twice as profitable as customers who paid low prices. Therefore, this strategy helps businesses increase profits and focus on customer groups that bring great economic value.
Limitations of the price skimming strategy
Applying the price skimming strategy also has disadvantages and risks of failure such as:
Creates a high customer churn rate: Customers may feel dissatisfied Phone Number List when they see others purchasing the product at a lower price than they paid. This can lead to a loss of trust and purchasing motivation of customers towards the business.
Considered unethical product pricing: Customers may feel that a business takes advantage of customer enthusiasm to increase prices in an unethical manner. This can affect the image and reputation of the business.
Attract competitors to offer similar products at lower prices: One disadvantage of price skimming is that it may attract competitors to offer similar products at lower prices. This can cause price competition and affect the maintenance of market share and profits of the business.
Difficulty entering a crowded market: In a study by Boston Consulting Group (2020), it was shown that price skimming strategies are less viable in a competitive market, when customers have the ability to Choose from many similar products and other brands to buy. This creates difficulties for businesses in capturing and maintaining customers in a crowded competitor market.
Difficulty in justifying high initial prices: One disadvantage of the price skimming strategy is the difficulty in justifying high initial prices to customers. Businesses must provide a clear and convincing reason for setting a high initial price, but this can be difficult and cause doubts from customers.
Signs that skimming pricing is appropriate for a business
Skimming pricing is an important strategy in business, but to apply it effectively, you need to recognize the signs that using this strategy is right for your business. Here are 4 important factors to recognize that:
The business's market is not subject to too much competition
An important factor in applying the skimming pricing strategy is that the business's market is not subject to too much competition. This means that consumers do not have many choices equivalent to the business's products at competitive prices. If the market is in a growth stage or the business's product is the only new product in that field, skimming pricing may be appropriate.
Maximize initial profits: Price Skimming allows businesses to earn high profits from customers willing to pay the highest prices. According to a report by McKinsey & Company, in 2017, this strategy helped a leading technology company increase revenue from $100 million to $500 million in just 18 months.
Skimming pricing strategy brings many benefits to businesses
Skimming pricing strategy brings many benefits to businesses
Building a premium and valuable image: Applying a price skimming strategy allows businesses to build a premium image for their products or services, creating an impression and creating special value. For example, Apple company used this strategy for their first iPhone in 2007, setting a higher starting price than competing products. This helped create a feeling of premium and unique product, and the iPhone became one of the most successful products in the history of technology.
Focus on customers who are willing to pay high prices: Price skimming strategy allows businesses to focus on the group of customers willing to pay the highest prices. According to a study by Nielsen, in 2016, customers who paid high prices were often twice as profitable as customers who paid low prices. Therefore, this strategy helps businesses increase profits and focus on customer groups that bring great economic value.
Limitations of the price skimming strategy
Applying the price skimming strategy also has disadvantages and risks of failure such as:
Creates a high customer churn rate: Customers may feel dissatisfied Phone Number List when they see others purchasing the product at a lower price than they paid. This can lead to a loss of trust and purchasing motivation of customers towards the business.
Considered unethical product pricing: Customers may feel that a business takes advantage of customer enthusiasm to increase prices in an unethical manner. This can affect the image and reputation of the business.
Attract competitors to offer similar products at lower prices: One disadvantage of price skimming is that it may attract competitors to offer similar products at lower prices. This can cause price competition and affect the maintenance of market share and profits of the business.
Difficulty entering a crowded market: In a study by Boston Consulting Group (2020), it was shown that price skimming strategies are less viable in a competitive market, when customers have the ability to Choose from many similar products and other brands to buy. This creates difficulties for businesses in capturing and maintaining customers in a crowded competitor market.
Difficulty in justifying high initial prices: One disadvantage of the price skimming strategy is the difficulty in justifying high initial prices to customers. Businesses must provide a clear and convincing reason for setting a high initial price, but this can be difficult and cause doubts from customers.
Signs that skimming pricing is appropriate for a business
Skimming pricing is an important strategy in business, but to apply it effectively, you need to recognize the signs that using this strategy is right for your business. Here are 4 important factors to recognize that:
The business's market is not subject to too much competition
An important factor in applying the skimming pricing strategy is that the business's market is not subject to too much competition. This means that consumers do not have many choices equivalent to the business's products at competitive prices. If the market is in a growth stage or the business's product is the only new product in that field, skimming pricing may be appropriate.