Price skimming is when you have a very high price that makes your product only accessible upmarket.
Price skimming is typically associated with luxury items and only works if you have a product or service that is highly valuable or perceived as highly valuable. Brands like Rolex, Mercedes-Benz, and Louboutin list of armenia consumer email use a price-skimming model, and the high price reinforces their luxury perception.
Regardless of actual quality, a higher price can be associated with a higher value, so if you have a unique, innovative product or a valued brand, a price skimming strategy can be used to gain a higher profit from fewer sales.
A price skimming strategy does limit the market segments you can appeal to, so if you want to grow and expand your business over time, you’ll probably have to eventually incorporate other pricing strategies so you can sell downmarket.
For products, you could continue to use a price-skimming strategy with new releases and lower the price of previous versions. Or product and service providers can offer “economy” versions of their solution to appeal downmarket.
However, if there is more demand for your solution than there is supply and you have brand equity, it is possible to grow while keeping your high price. For example, the marketing agency Ogilvy morphed a price skimming strategy into a prestige pricing strategy.
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