Price skimming
Price skimming sets a high launch price to capture value from customers most willing to pay, then progressively reduces the price to reach more price-sensitive segments; it works best when the product is innovative and imitation is slow.
FrameworkPricing strategy
See it move
A new headphone launches at €300, priced for customers who value it enough to pay a premium immediately. Six months later the price drops to €220, reaching a broader tier of buyers, and by year one it settles at €150 for the mass market. Price skimming works this way only while imitation is slow and differentiation holds, because each cut ends the previous tier's premium.
Check yourself
A technology firm launches a smart-home device with features competitors cannot replicate for at least 18 months. The marketing team recommends a high launch price, then progressive reductions over time. Which combination of conditions makes this price-skimming strategy most likely to succeed?