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Definition

Market-skimming pricing

Market-skimming pricing (price skimming)- setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer buy more profitable sales. For example, when Apple first introduced the iPhone, its initial price was much as $599 per phone. The phones were purchased only customers who really wanted the sleek new gadget and could afford to pay a high price for it. Six months later, Apple dropped the price to $399 for an 8GB model and $499 for the 16 GB model to attract new buyers. Within a year, it dropped prices again to $199 and $299, respectively, and you can now buy an 8 GB model for $99. In this way, Apple skimmed the maximum amount of revenue from the various segments of the market.

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