4 responses 04/01

Sneha Work:

Businesses across the world look for different pricing strategies and Price skimming is a widely used strategy. According to Adam Hayes "Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time"(Hayes, 2021). Businesses follow this strategy to maintain competitive prices than their competitors. Customers will always look for an alternative in this digital world. Many price matching tools help customers get similar products. On the other side, product owner makes sure that their product is at the selling price. When a company launches their product into the market they keep a higher price until competition arises, Once they find that there is a similar competitive product for a less price than their product they reduce the price to attract the customers and generate profits. Even though businesses make a better profit when the product has a higher value when they see a competitive product they focus on high-quality sales which brings them equal profit. Price Skimming strategy has a major limitation of short time money generations because of high prices they also need to plan to maintain the lower prices. According to author Patrick Campbell "Incorporate skimming into your pricing strategy only when you have enough repeat buyers to generate dependable word of mouth and assurance that you can’t be easily undercut"(Campbell, 2020).

            Sony Corporation is well known for its electronics, they produce high-quality products which brought them immense brand value. Price skimming strategy is also followed by Sony Corporation. As Roberta  Greenspan mentioned, "Sony also implements value-based pricing to determine the appropriateness of some premium prices, based on actual product value and customers’ perceived value of the products"(2017). They follow price skimming using a premium pricing strategy. An example of Sony's price skimming strategy was explained by Anders Bylund as follows "That's why Sony sold a 55-inch 4K TV set for $4,000 just 20 months ago, but now offers an updated version of the same screen for just $1,500"(2015). These examples made me believe that the price skimming strategy is working for businesses and also customers' thoughts are changing to opt for these products because of the price drops.

 

References

Anders Bylund. (2015). How to price skimming boosts modern pricing strategies. Fool. https://www.fool.com/investing/general/2015/06/24/how-price-skimming-boosts-modern-pricing-strategie.aspx

Adam Hayes. (2021). Price Skimming. Investopedia. https://www.investopedia.com/terms/p/priceskimming.asp#:~:text=Price%20skimming%20is%20a%20product,then%20lowers%20it%20over%20time.&text=The%20skimming%20strategy%20gets%20its,prices%20are%20lowered%20over%20time.

Patrick Campbell. (2020). Complete Guide to price skimming.Profitwell.https://www.profitwell.com/recur/all/price-skimming

Roberta  Greenspan. (2017). Sony Corporation's Marketing Mix(4Ps) analysis. Panmure. http://panmore.com/sony-corporation-marketing-mix-4ps-analysis

Jacob Work:

Price skimming strategy is often referred as a new product strategy which results in a high initial product price which will gradually decrease over a period of time based on the demand factors within the market. Whenever a new product is launched in the market with unique and high-end features in comparison to the existing products in the market. It is difficult for experts to determine the demand and acceptance of products in the market. Price skimming strategy is widely practice for high end technological products which enable unique features and services in comparison to its rivalries. Price skimming helps in recovering sunk costs and recover from development costs and high prices will result in high profits and higher margins in profits. Electronic devices and IT technologies play vital role in price skimming. As with the technological advancements and market demands electronic devices and technologies come up with modern features which will serve the need and will enhance services and make changes in technology which will result in higher price for new versions with advance features. In such cases, demand for older products and services will reduce(Bhasin & Fernandez., 2017).

One such example is related to Apple product which releases its new gadgets every year with new and advance features which will show immediate demand in the market for various reasons. When Apple launches its iPhone 4s series in the market in the year 2011 at that time there were very less people in the market to afford iPhone. Later with the release of new series of iPhone 4 version with new and updates services and features apple reduces its price for old model i.e., iPhone 4s. Soon after the reduced price and already boom in the market for apple products allowed customers to purchase Apple products. Though apple usually releases its products in higher pricing in comparison to its other rivalries who also provide similar services. Apple mainly focuses to attract the customers who do not mind to pay premium cost to buy products and are so much brand conscious and are interested in Apple services and once the targeted consumers buy the products and the sales value attains the reach then apple comes up with new price variation and some of the consumers deliberately wait till the time apple reduces its price and will purchase its products. This kind of price strategy is widely practiced by Apple. Apple has its own brand value and never fails to reach the expectations of consumers and always comes with some unique features which will immediately draw the attention of consumers and has huge demand in the market.( Gartenstein., 2019).

References:

Bhasin, H., & Fernandez, C. (2017, December 16). Skimming price - Skimming pricing strategy in Marketing. Retrieved from https://www.marketing91.com/skimming-price/.

Gartenstein, D. (2019). What Are the Benefits of Skimming Pricing Strategy? Retrieved from: https://smallbusiness.chron.com/benefits-skimming-pricing-strategy-5122.html