Assess the likely usefulness of price skimming to Samsung pricing strategy
Price skimming is a pricing strategy where a business sets an initial high price for a
new product before slowly lowering it overtime. This strategy is quite useful for
Samsung but there also are some drawbacks.
One reason why price skimming could be effective is that Samsung is increasingly
focusing on the premium smartphone market. Also, states that Samsung intends to
focus on the premium segment and has launched high end products such as the S23
Ultra priced at over $1600 in the USA.
Customers who strongly value new designs like foldable screens, and high storage
capacity may be willing to pay high prices when the phones are first launched. Which
would allow Samsung to make maximum profit before other businesses also make
similar products.
Price skimming could also help Samsung cover the cost during production. Also,
Foldable phones are still quite new to the market meaning that Samsung have an
advantage so they can make their product expensive and allow Samsung to make
high profits.
Furthermore, a different advantage would be that high prices can improve their
image as their products would look more exclusive, allowing them to compete with
their competitor. Samsung may therefore use price skimming to position its products
as premium devices rather than competing purely on low prices.
However, the usefulness of price skimming may be limited because Samsung faces
intense competition from Chinese rivals such as Xiaomi, and Huawei. The data
shows Samsung’s smartphone sales fell from 74.5 million units in Q1 2022 to 58.3
million in Q2 2022, showing that they had pressure. Chinese competitors usually sell
phones at a low price so if Samsung charges too high customers may choose
cheaper brands this is highly likely in price sensitive markets
Overall price skimming can help Samsung make more profit and be a premium
brand, but cheaper brands and there being a low demand for smartphones may limit
its success.
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Definition = knowledge
Application = included Samsung
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Advantages mentioned also mentioned disadvantages
Therefore, knowledge and application sec: 4/4
Basic evaluation so analysis 2/4
Evaluation 2/4
Overall = 8/10