Tips for implementing a price skimming strategy

Request a demo


Profile picture for user Ángela de la Vieja

Ángela de la Vieja

When planning the launch of a new product or service into the market, you must assess all of the possible pricing strategies that are available since the demand for this new item and its future success will largely depend on its launch price. Among the most widespread are skimming pricing or price skimming strategies, which are especially useful for high-quality products with limited demand. We’re going to explain which aspects you should consider to achieve the greatest profits and optimise sales in your eCommerce business.

As a starting point, let’s remember that price skimming consists of establishing a high price for the launch of a new product or service that is of good quality. You’ll then lower the price later on to attract new targets. This is mainly used in markets where the price attracts consumers and there’s not a lot of competition. The ultimate goal is to make the company’s initial profit margin higher without needing to sell many more products. This is the model that Apple uses when launching its smartphones, which has allowed it to increase its sales over the years. Currently, the iPhone 11 has become the best-selling mobile phone worldwide in the first quarter of 2020.

For this strategy to work, the first step is to complete a thorough study of the elasticity of demand to predict how the new product will be accepted by the target audience that is willing to spend a larger amount of money. In addition, you ought to analyse the market situation in detail since this price skimming strategy will only world in a poorly saturated market.

The importance of marketing

Every price skimming strategy should be accompanied by a good marketing and publicity campaign to attract the attention of possible buyers, generate high expectations about the new products or services, and create demand. You could design an omnichannel campaign to reach the public through the media, the internet, social networks, and email lists. To return to the example of the launching a new iPhone, the first step is always an advertisement that will have an impact on the followers of the brand, usually at an international event, such as the Mobile World Congress.

On the other hand, a good way to increase the desire of potential customers is to offer a pre-sale of limited stock. This will allow you to give an impression of exclusivity among those interested that will increase their engagement with the brand. Not only will you be promoting the sale of this new product, but you will also be encouraging customer loyalty in those clients, who will begin to feel closer to the brand. Good customer service before and after the sale will do the rest.

The subsequent price update

In the medium and long term, the high prices defined for the price skimming strategy should be gradually updated and lowered to establish a level number of sales and reach the public who has a lower willingness to pay. This modification will depend on the evolution of the sales, the demand, the market tendencies, and the actions taken by the competition, all of which you can assess through software that allows you to monitor the prices of the competition. From time to time, you can analyse how these new prices are functioning and propose new strategies, such as the organisation of private sale or seasonal promotions, like summer discounts or Black Friday.

The price drops need to be closely monitored since an incorrect move or a very sharp decrease in price could generate a negative response in the consumers and negatively affect the company’s brand image. After this, once the maximum level of performance has been achieved, it will be the perfect time to present a new product or service with which you can promote the continuous growth of your eCommerce business.

Find out how Minderest can take your business to the next level.

Contact our pricing experts to see the platform in action.

Related Articles