The Skimming Pricing Strategy

What is skimming pricing?

At some point, we have all acquired a product in advance, knowing that since it’s a new model or launch, it would entail a significant expense. Even on the contrary, we have followed a product that we liked but we have waited a while for it to drop in price or to stabilize when a superior model or a model twinned with it is released. Haven’t we? Well, in both cases we have been part of Skimming Pricing.

But… What exactly is it about?

Skimming Pricing is the pricing strategy for a product introduced by a brand or manufacturer, setting its maximum initial price and planning a price decrease over time.

This strategy focuses on maximizing revenue at its launch while its competitors do not yet have a product with similar features, thus quickly covering the investment in future releases.

Skimming Pricing is a widely used strategy in technology or in the motor world. Manufacturers create the need to have the latest technology or the most advanced model, and, assuming high demand, they manage to set their highest price on that product. This really works when the model or product has unique or highly desired features at the time.

Many slogans use future value arguments like “the latest technology” or “the best in its category.”

When is it interesting to use a Skimming Pricing strategy?

As we mentioned, this strategy is not ideal for all types of products, but for those that can offer a significant change, innovation, or leap in their range. Also for those that have temporary releases before losing value, such as fashion and its seasons.

Given these requirements, two risks must be taken into account:

• Launching the product with a very high price without generating expectations or without having notable qualities.
• Arriving very late to the subsequent price drop and competitors taking advantage of your delay to launch their model with a slightly lower price or higher qualities.

In this way, it is essential to know the trajectory it may have in the market, and even be alert and attentive to competitor products and their launches.

Apple as an example

In this case, we can observe over different years the varying trajectory of Apple’s pricing strategy with different iPhone models:

Source

Skimming Pricing is undoubtedly one of the most commonly used strategies by major brands and can evolve, always linked to a comprehensive marketing strategy to avoid setting the wrong price from the outset.

A thorough tracking of competitors, as well as a review of their price history over time, is essential to understand their strategies and guide our own.

With flipflow, you can access this information, track the price evolution of your competitors, and see if they are expanding their catalog. This way, you can determine if Skimming Pricing is a suitable strategy for your business among the pricing strategies you can implement.