Market Skimming PricingMa

Many companies that invent new products initially set high prices to 'skim' revenues layer by layer from the market. Intel is a prime user of this strategy, called market-skimming pricing. When Intel first introduces a new computer chip, it charges the highest price it can, given, the benefits of the new chip over competing chips. It sets a price that makes it just worthwhile for some segments of the market to adopt computers containing the chip. As initial sales slow down and as competitors threaten to introduce similar chips, Intel lowers the price to draw in the nest price-sensitive layer of customers.5

Maava'l was launched in Sweden at Skrl2, more than twice the price of ordinary yoghurt. Developed by Scotia and a consortium of 1,300 Swedish farmers, Maaval contains Olibra, a 'nutriceutical' made of a patent combination of palm oil extract, oat oiJ and water. It encourages the small intestine to release chemicals that tell the brain that enough has been eaten, giving a 'prolonged feeling of fullness'. The high price indicates the product's uniqueness and special properties, and allows quicker recovery of development costs. Similar value-added foods have proved profitable. Finland's Kasio has seen its share price increase tenfold since it launched Benecol, a cholesterol-lowering margarine."

Rolex pursues a premium pricing strategy, selling very high quality watches at a high price. In contrast Timex uses a value-pricing strategy, offering good quality watches at more affordable prices.

Continue reading here: Segmented Pricing

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