The price skimming strategy is sometimes called a "market-plus" approach to pricing because it denotes a high price relative to the prices of competing products. When does this strategy work best?
A)when competition is abundant
B)when revenues are equal to expenses
C)when supply is greater than demand
D)when demand is greater than supply

Question

Quizplus · Accepted Answer

The price skimming strategy works best when there is high demand for the product or service and supply is limited. By setting a high price initially, the company can capture the maximum revenue from early adopters and price-sensitive customers while gradually lowering the price to attract more mainstream customers. This approach is typically used for new or innovative products that have a short window of opportunity to generate high profits before competitors enter the market. When there is abundant competition or oversupply, price skimming may not be effective as customers have more options to choose from and are less willing to pay premium prices. Similarly, when the revenues are equal to expenses, it may not make sense to adopt a price skimming strategy as the company needs to cover its costs and generate profits to sustain the business.

The Price Skimming Strategy Is Sometimes Called a "Market-Plus" Approach