I am preparing myself for an interview for a position in Sales. Can you help me understand the meaning of “price skimming”?

Price skimming

Many Companies developing new products or marketing new technology or new innovation tend to charge highest initial price for their product. As the product is new in the market or product is hitting the market first time, the consumers are open to pay higher price, once the initial euphoria is over and customers are satisfied and the competition starts heating the market, the innovator or product launcher reduces the price after some time, may be a few months or say 2/3 years down the time and make the product available to the customers at a more competitive price so as to continue to get customers for their product.

The Organizations often use skimming technique for pricing to cover the cost of development of product or technology. This is positively a useful strategy when:-

The Organisation is sure support from customers to their product at higher price.

The high price keeps competitors away from the market. In other words looking higher initial investment in product development there would be few players entering that market so the original developer gets amply rewarded with higher price tag as the customers tend to accept the fact that high price stands for high quality of the product.

even this is not a relevant question for a sales interview because in a similar situation you should know the sales capacity of the person; price skimming is the highest initial price a company will charge & customers will pay & this is usually happening at the launch of the product.

thanks for invited me to answer this question Price scrapping or price skimming is a pricing strategy during which the marketing expert sets a relatively high price for the product or service at first, and then reduces the price over time. This is a time frame for the strategy of price discrimination or revenue management according to a margin and allowances. This allows the company to recover the sunken cost quickly before entering the competition steps and reducing the market price