How does a skimming pricing strategy approach price setting?

Question

Multiple choice question.

Different prices are charged in an effort to match demand and supply.

Prices are set low initially and then gradually raised.

Prices are set high initially and then lowered in a series of steps.

A fixed percentage is added to the cost of all items in a product class.

Answer 1

The correct option is:

Prices are set high initially and then lowered in a series of steps.

This approach is known as skimming pricing, where a company initially charges a high price for a new or innovative product to maximize profits from early adopters before gradually lowering the price to attract more price-sensitive customers.