DECA Sports and Entertainment Marketing Practice Exam

Which pricing strategy involves introducing new products at a very high price?

1. Penetration pricing

2. Everyday low pricing

3. Skimming price strategy

4. Discount pricing

The correct answer is: Skimming price strategy

The strategy that involves introducing new products at a very high price is known as the skimming price strategy. This approach is often used when a company wants to maximize profits from a new product that has little competition or is perceived as innovative. By setting a high initial price, the company can target consumers who are less price-sensitive and willing to pay more for perceived exclusivity or advanced features. As sales begin to decline or as competitors enter the market, the company may then lower the price to capture a broader market segment. This strategy leverages the concept of price elasticity of demand, where the high initial price attracts a certain consumer demographic, allowing the business to recover development costs quickly and establish brand prestige before gradually transitioning to a more competitive pricing model. In contrast, other pricing strategies, such as penetration pricing, aim to attract a large number of customers with low prices, while everyday low pricing focuses on offering consistent low prices instead of short-term discounts. Discount pricing is also aimed at reducing prices temporarily to boost sales volume or clear out inventory.