Which pricing approach involves charging a high price in the short term for a product in demand?

Which pricing approach involves charging a high price in the short term for a product in demand?

• A. The channels of distribution
• B. Brand positioning
• C. Skimming price
• D. Cost plus pricing

Answer: (C)

Price skimming is charging a high price in the short term for a product that is in demand. The idea is to capture the willingness to pay from early buyers who value having the new or highly desirable item first. By starting with a premium, the business can maximise margins and recover development costs quickly before competition reduces the price pressure. If demand stays strong or competitors appear, the price can be lowered over time to attract more price‑sensitive customers. This approach suits innovative or differentiated products with strong early interest or limited supply. It differs from cost-plus pricing, which bases price on cost plus a markup, and from brand positioning or channels of distribution, which relate to image and how the product reaches customers rather than the launch pricing tactic.

Price skimming is charging a high price in the short term for a product that is in demand. The idea is to capture the willingness to pay from early buyers who value having the new or highly desirable item first. By starting with a premium, the business can maximise margins and recover development costs quickly before competition reduces the price pressure. If demand stays strong or competitors appear, the price can be lowered over time to attract more price‑sensitive customers. This approach suits innovative or differentiated products with strong early interest or limited supply. It differs from cost-plus pricing, which bases price on cost plus a markup, and from brand positioning or channels of distribution, which relate to image and how the product reaches customers rather than the launch pricing tactic.