What pricing strategy involves setting a high initial price on a new product to maximize profit from early adopters?

The strategy that involves setting a high initial price on a new product to maximize profit from early adopters is known as price skimming. This approach is used to recover the development costs and capitalize on the willingness of early adopters to pay more for a new and innovative product. By starting with a higher price, a company can take advantage of consumers who are less price-sensitive and are eager to be among the first to experience the new offering.

Over time, as the initial demand from early adopters begins to decline, the company may lower the price to attract more price-sensitive customers and expand its market share. This strategy not only helps in recouping the initial investment quickly but also allows companies to segment their market based on consumer price elasticity.

The other pricing strategies — such as price penetration, value pricing, and competitive pricing — operate under different principles, focusing on gaining market share, aligning prices with perceived value, or matching competitor prices, rather than maximizing early profits from innovative products.