CMA Final · Strategic Cost Management · Pricing Decisions and Strategies
Which pricing strategy involves setting a high initial price for a new, innovative product and lowering it over time to capture consumers with differing willingness to pay?
The strategy is price skimming. A firm launches an innovative product at a high price to earn from buyers willing to pay more, then reduces the price gradually to reach more price-sensitive segments. Penetration pricing is the opposite approach.
- APenetration pricing
- BPrice skimmingCorrect
- CPredatory pricing
- DLoss-leader pricing
Explanation
Price skimming starts high to take the surplus from early adopters and then reduces price in stages. Penetration pricing does the opposite, starting low to gain share quickly.
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