Organizations can be most effective using skimming pricing under which two conditions?

Question

Multiple select question.

The customer understands and highly values the product.

Customers are very price sensitive.

The product is protected by patent.

Production costs are increasing over time.

Answer 1

Organizations can be most effective using skimming pricing under the following two conditions:

1. The customer understands and highly values the product. - When customers appreciate the unique features or benefits of a product, they are more likely to be willing to pay a premium price for it.

2. The product is protected by patent. - If a product is patented, it means that the company has a legal advantage that can prevent competitors from entering the market. This allows the company to set higher prices without the threat of competition driving prices down.

The other two options—customers being very price sensitive and production costs increasing over time—are not conducive to a skimming pricing strategy. Price-sensitive customers are less likely to pay a high initial price, and increasing production costs would typically necessitate a different pricing strategy to maintain profit margins.