Which of the following is a major disadvantage associated with the skimming pricing strategy?
A)It is not effective for higher-end goods.
B)It is not effective in recovering the high research and development costs.
C)It attracts competition as potential competitors enter into the market observing the high financial returns obtained by innovative firms.
D)It leads to fulfillment problems if the demand for the product outstrips the firm's production capacity.

Question

Quizplus · Accepted Answer

Skimming pricing strategy involves setting high prices for innovative products to recover the high research and development costs. However, this high pricing strategy also attracts competition as potential competitors observe the high returns obtained by innovative firms. This increases the risk of losing market share and profitability in the long run. Therefore, choice C is the correct option as it highlights a major disadvantage associated with skimming pricing strategy.

Which of the Following Is a Major Disadvantage Associated with the Skimming