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What stage of the product life cycle is price skimming normally associated with? (A) Establishment (B) Maturity (C) Steady state (D) Decline - HSC - SSCE Business Studies - Question 20 - 2001 - Paper 1
Question 20
What stage of the product life cycle is price skimming normally associated with? (A) Establishment (B) Maturity (C) Steady state (D) Decline
Worked Solution & Example Answer:What stage of the product life cycle is price skimming normally associated with? (A) Establishment (B) Maturity (C) Steady state (D) Decline - HSC - SSCE Business Studies - Question 20 - 2001 - Paper 1
Step 1
What stage of the product life cycle is price skimming normally associated with?
Answer
Price skimming is a pricing strategy where a new product is introduced at a high price point, with the intention of lowering the price over time as the product moves through its life cycle. This strategy is typically associated with the 'Establishment' stage of the product life cycle. This is when the company aims to maximize revenues from early adopters who are less price-sensitive.
In contrast, during the maturity stage, competition increases, and lower prices often lead to market share battles, making price skimming less viable. Therefore, the correct answer is (A) Establishment.