Consulting Case Interview Practice Questions

Answer: True. A cream-skinning pricing strategy can erode long-term customer loyalty.
In a cream-skinning strategy, a company is typically launching a highly desirable product that has a high willingness to pay group of people. It charges those people a high price, and then it later reduces prices.
The iPhone is a strong example. Apple initially priced high and many of its loyal customers paid up. However, two months later, it substantially reduced the price, angering these customers.
Key Takeaway: You can minimize the erosion of customer loyalty by releasing a new model with slightly fewer features at the reduced price.