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CS Professional · Strategic Management and Corporate Finance · Business Policy and Formulation of Functional Strategy

A Chennai electronics firm launches a new smart speaker with unique features at a high initial price to recover development costs quickly from early adopters, planning to reduce the price later. Which pricing strategy is this?

This is price skimming. The firm charges a high price at launch to earn high margins from early adopters and recover development costs, then lowers the price in stages to reach more price-sensitive buyers. Penetration pricing is the reverse approach, starting low to build market share.

  1. APrice skimmingCorrect
  2. BPenetration pricing
  3. CCost-plus pricing
  4. DGoing-rate pricing

Explanation

Setting a high price at launch for early adopters and lowering it over time is price skimming. Penetration pricing does the opposite, starting low to gain share quickly. Cost-plus ignores the launch-and-reduce pattern, and going-rate follows competitors.

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