I (Meaning and importance of Exports) Unit Structure

10.6 
 SKIMMING PRICING STRATEGY 
10.6.1
MEANING 
A high premium price is charged when a product is launched 
in the market. 
This strategy is suitable to those products that offer 
important benefits to the target audience, and that the target 
audience does not mind paying higher price. Secondly, for 
skimming pricing to be successful, there should be little chance for 
competitors to enter the market in a short period of time. This is 
possible in the case of highly technical and complex products. 
10.6.2 ADVANTAGES OF SKIMMING PRICING STRATEGY 
1. Higher Profits 
Higher prices fetch higher revenue, such higher revenue or 
profits can provide enough funds for financing big projects of 
international level. 
2. Developmental Expenses 

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Higher profits in the initial stages can cover large 
developmental expenditure such as that of testing laboratory 
expenses, distribution network etc. 
3. Demand Assessment 
Normally if enough demand exists, it is easier to quote a 
higher pri9ce initially, then slowly lower it down up to a certain limit 
and again shoot it up once the market is satisfactorily captured. 
4. Suitability 
Skimming prices are essential in case of certain products 
which may become out of date due to changes in fashion, 
technology, etc. If the seller charges low prices initially ad await for 
rise in price at a later date, then he may not get enough revenue 
because of declining demand. 
5. No Blocking of Funds 
High prices do bring income and as such funds are not 
blocked. The exporter can use such funds in production and 
marketing activities. 
6. Feasible for Short Term 
Such prices are useful when the exporter wants to stay in 
the market only for a short period of time and not interested in the 
long run business in export markets.