Cohort analysis is a powerful tool for marketers and business owners to understand the behavior and performance of different groups of customers over time. It helps to identify patterns, trends, and opportunities for improving customer retention, loyalty, and lifetime value.
One of the factors that can affect cohort analysis is the pricing strategy of a product or service. Pricing strategy refers to the way a business sets and adjusts its prices to achieve its goals and objectives. There are different types of pricing strategies, such as cost-based, value-based, penetration, and skimming.
In this article, we will focus on skimming price and its impact on cohort analysis. Skimming price is a pricing strategy that includes putting a high initial price for a new or novel product or service, and then gradually lowering it over time as the market becomes more saturated or competitive. The main objective of skimming price is to maximize profits in the early stages of the product life cycle, when demand is high and customers are willing to pay a premium.
Skimming price has some advantages and disadvantages for businesses. Some of the advantages are:
– It allows businesses to recover their research and development costs quickly.
– It creates a perception of high quality and exclusivity for the product or service.
– It attracts early adopters and innovators who are less price-sensitive and more loyal.
– It discourages competitors from entering the market or undercutting the price.
Some of the disadvantages are:
– It limits the market size and potential customer base.
– It may alienate some customers who cannot afford or justify the high price.
– It may invite negative feedback or criticism from customers who feel exploited or dissatisfied.
– It may trigger a price war with competitors who eventually enter the market with lower prices.
How does Skimming Price affect Cohort Analysis
Cohort analysis can help businesses evaluate the effectiveness and sustainability of their skimming price strategy. By segmenting customers based on their acquisition date, purchase frequency, retention rate, and lifetime value, businesses can measure how skimming price influences customer behavior and loyalty over time.
Some of the questions that cohort analysis can answer are:
– How does skimming price affect customer acquisition? Does it attract more or fewer customers than other pricing strategies?
– How does skimming price affect customer retention? Do customers who pay a high initial price stay longer or churn faster than customers who pay a lower price later?
– How does skimming price affect customer lifetime value? Do customers who pay a high initial price generate more or less revenue and profit than customers who pay a lower price later?
– How does skimming price affect customer satisfaction? Do customers who pay a high initial price rate the product or service higher or lower than customers who pay a lower price later?
By analyzing these metrics across different cohorts, businesses can determine whether skimming price is a viable and profitable pricing strategy for their product or service. They can also identify the optimal time to lower their prices to capture more customers and increase their market share.
Conclusion
Skimming price is a pricing strategy that includes putting a high initial price for a new or novel product or service, and then gradually lowering it over time as the market becomes more saturated or competitive. It aims to maximize profits in the early stages of the product life cycle when demand is high and customers are willing to pay a premium.
Skimming price has some advantages and disadvantages for businesses, depending on their goals, objectives, and market conditions. Cohort analysis can help businesses evaluate the impact of skimming price on customer behavior and performance over time. By segmenting customers based on their acquisition date, purchase frequency, retention rate, and lifetime value, businesses can measure how skimming price influences customer acquisition, retention, lifetime value, and satisfaction across different cohorts.
Cohort analysis can help businesses decide whether skimming price is a suitable and sustainable pricing strategy for their product or service. It can also help them determine the optimal time to lower their prices to attract more customers and increase their market share.
