kostnaðarskeiða

Kostnaðarskeiða is an Icelandic term that translates to "cost-skimming" or "profit skimming." It refers to a pricing strategy where a company sets a high initial price for a new product or service and then gradually lowers the price over time. This strategy is often employed for innovative products or those with little initial competition.

The primary goal of kostnaðarskeiða is to maximize profits by capturing the willingness to pay of early adopters who are less price-sensitive. These customers are often willing to pay a premium for the novelty or perceived superiority of a new offering. As the market matures, competition increases, or the product becomes more widely known, the price is reduced to attract a broader customer base, including more price-sensitive segments.

This strategy can be effective in recouping research and development costs quickly and establishing a premium brand image. However, it can also deter potential customers who are unwilling or unable to afford the initial high price, potentially limiting market penetration in the short term. For kostnaðarskeiða to be successful, the product or service must offer significant value, and the company must be prepared to adjust its pricing as market conditions evolve. It is a dynamic approach to pricing that requires careful market analysis and strategic implementation.