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Business Definition for: skimming
skimming

pricing strategy usually used in the early stages of the product life cycle that targets a small number of consumers who are willing to pay a relatively high price for the product. Over time, the price may be reduced to take advantage of production economies of scale achieved by selling higher volumes. A skimming strategy can attract competitors to the market if the product or technology can be easily duplicated. Luxury perfumes use a skimming strategy that takes advantage of the high perceived value, enabling them to sell perfume at hundreds of dollars per ounce. The term is derived from the concept of "skimming the cream" off a bottle of milk. In this case, the marketer is skimming the cream, or the best consumers, off the market.

See also milking strategy
skimming

  1. illegal practice of failing to account for some sales, frequently with the intent of tax evasion or cheating a partner.
  2. marketing strategy where a high initial price is charged for a newly introduced product in order to expedite the development cost recovery. At a later point the price is reduced to offset competitive products and slowing demand.

Copyright c 2000, 1994, 1987 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

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