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Finance Dictionary and Glossary of Investment Terms
price skimming
Definition 1.
A pricing technique designed to allow a business to charge each potential customer the most that he or she would be willing pay for a given product or service. The product or service is first offered at the highest price that customers will pay, and the price is incrementally dropped until it reaches a level designed to be viable for the long term.
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Definition 2.
A product pricing strategy by which a firm charges the highest initial price that customers will pay. As the demand of the first customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment.Therefore, the skimming strategy gets its name from skimming successive layers of "cream," or customer segments, as prices are lowered over time.
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