A new product can be introduced at a high price and then lowered over time. Price skimming is that strategy. Early adopters who value the product highly and are less sensitive to price pay the initial premium. As the market expands and competition appears, the price is reduced to attract more price-sensitive segments.

Skimming works when the product is genuinely differentiated, when early demand is relatively inelastic, and when the firm can protect the high-price position for a period—through patents, brand strength, or limited supply. It allows the firm to recover development costs quickly and to segment the market by willingness to pay over time.

The risk is that a high initial price may slow adoption or invite competitors to undercut. In categories where network effects or rapid volume are critical, penetration pricing may be preferable. Choosing skimming requires a clear view of the product’s uniqueness and of the trajectory of demand and competition.