What is the primary objective of price skimming in a business strategy?

The primary objective of price skimming in a business strategy is to recover costs quickly after a product launch. This strategy involves setting a high initial price for a new or innovative product to maximize revenue from early adopters who are less sensitive to price. As these customers are willing to pay a premium to be among the first to own the product, the business can recoup its initial costs associated with research, development, and marketing more rapidly.

Once the early market has been exploited, the price may gradually be lowered to attract a broader base of price-sensitive customers. This approach not only helps in recovering costs quickly but also allows the company to segment the market effectively, targeting high-value customers first and then expanding once costs have been covered. This recovery of investment is crucial for the overall financial health and sustainability of the product and the company itself.