Stevens Outdoor Furniture has just introduced a new line of products in the southeastern United States. Owner James Bilby discovered the new line, which includes outdoor furniture and other lawn items, on a recent vacation to California. The market is extremely promising because none of his main competitors stocks this type of furniture. He’s concerned, however, about pricing because shipping costs will drive his prices higher than those charged by stores closer to the manufacturer’s West Coast factory. Initial promotion and advertising costs, as well as warehousing expenses, are also on Bilby’s mind. He’s called a teleconference with his ten store managers to develop a pricing strategy that must take effect immediately.
-Skimming pricing,which would also help Bilby recover some of his initial costs,is a viable option because Stevens has virtually no competition.

Question

Quizplus · Accepted Answer

Skimming pricing is a strategy where a firm charges the highest initial price that customers will pay and then lowers it over time. Since Stevens Outdoor Furniture has virtually no competition for its new line of products, they can set higher prices initially to recover the initial costs, making skimming pricing a viable option.

Stevens Outdoor Furniture Has Just Introduced a New Line of Products