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Price Skimming, Apple Inc

In: Business and Management

Submitted By phenzy
Words 695
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Price Skimming is defined as a strategy in which the price of a product is set relatively high at the introductory stage and gradually lowered over time (Cateora et. al. 2009).. The objective of this strategy is to make people who strongly desire the product pay a premium price when the product is first released into the market. When the demand of the first layer of customers is saturated, the price is reduced in order to appeal to the next layer of customers that are increasingly price sensitive. Hence, the name of this strategy is derived from skimming successive customer segments referred to as “cream” layers.

According to Kumar (2007), Firms can capitalise on the international demand for their products when they are the only seller of a new or innovative product, or when the brand has exceptional features, symbolic appeal and use price skimming to maximise profit, till competition forces the firm to price their products lower. It is usually oriented towards a market that is willing to pay high premium prices for the special offering. Skimming strategies are usually employed with premium brands and works in favour of the branding as well, as the initial high prices can possibly build a high-quality image or position their product as one that is premium and luxury tiered. Especially in the technological sector where large amounts of money has been invested into the research and development of a innovative product, skimming allows the high set-up cost to be offset within a short amount of time.

Apple Inc is one such brand within the technological sector that employs a price skimming strategy for profit maximization in the international market. Apple has positioned and branded themselves as a mid ranged premium lifestyle product that has won the masses and captured a large market share globally. Apple products appeal largely to the mass consumer market as…...

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