Troy Bourbon, a local bourbon distillery, initially sold its product at a premium price of $45 because the company believed consumers would view the bourbon as a prestige item. The company decided that when startup costs had been fully recovered and competition became imminent, the company would reduce the price to $30 which was more expected in the market. The distillery is using a
A) variable pricing strategy.
B) price skimming strategy.
C) price lining strategy.
D) penetration pricing strategy.

Question

Quizplus · Accepted Answer

Troy Bourbon is using a price skimming strategy, which involves setting a high price initially and then lowering the price over time as the market evolves and competition increases. This approach is often used to recover startup costs quickly and to take advantage of the product's novelty and lack of competition at the outset.

Troy Bourbon, a Local Bourbon Distillery, Initially Sold Its Product