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Business Strategy and Accounting Basics

When launching a new measurement instrument, a company set a high price aimed at the few customers who value the new technology highly and want to adopt it early, recovered its development costs quickly, and then lowered the price step by step to follow demand. Which pricing strategy is this?

  1. APrice skimming
  2. BPenetration pricing
  3. CCost-plus pricing
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Answer: A. Price skimming

Price skimming sets a high price at launch, earns large profits from a small group of customers who care little about price, and recovers development costs quickly. It suits products with strong technical uniqueness that competitors cannot quickly catch up with. Penetration pricing, by contrast, sets a low price from launch to take a large share at once, aiming to build up cumulative production and lower costs through the experience curve.

  • A. Correct. It first captures the top layer of customers at a high price and then lowers the price.
  • B. This strategy sets a low price from the start to gain a large share quickly.
  • C. This method sets the price by adding a fixed profit to the product's cost and does not directly consider customer valuation or the competitive situation.
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