Chem Labs, Inc. has just developed a superior new drug to treat gastrointestinal

Question

Chem Labs, Inc. has just developed a superior new drug to treat gastrointestinal disorders (e.g. ulcers). Barriers to market entry (for other) are high and Chem Labs desires a quick return on its investment. Under these circumstances, the most appropriate pricing strategy would be: a. Skimming pricing b. Penetration pricing c. Accelerated maturity pricing d. Time series e. New venture pricing Chem Labs, Inc. has just developed a superior new drug to treat gastrointestinal disorders (e.g. ulcers). Barriers to market entry (for other) are high and Chem Labs desires a quick return on its investment. Under these circumstances, the most appropriate pricing strategy would be: a. Skimming pricing b. Penetration pricing c. Accelerated maturity pricing d. Time series e. New venture pricing

Explanation / Answer

Since the drug has considerable barriers to market entry, the company must put a premium pricing in place so as to make increasing revenues and higher profitability. Once it will be repeated by the competition, they might reduce the price later.

So, in this case, the company must follow Skimming Pricing strategy, so option a is correct.

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