What pricing strategy involves setting a high initial price for a new product and then lowering it over time?

The correct answer is price skimming. This pricing strategy is typically employed when a company launches a new product that has a unique feature, innovation, or a strong brand backing. By setting a high initial price, the company aims to maximize profitability from early adopters, who are often less price-sensitive and willing to pay more for the latest advancement.

Over time, as the novelty of the product diminishes or as competitors enter the market, the company gradually reduces the price. This approach not only helps to recover initial development costs quickly but also caters to different segments of consumers who may be more price-sensitive in the future. Price skimming can be particularly effective in industries such as technology, where innovations often command premium prices at launch.

The other options represent different strategies: penetration pricing seeks to quickly gain market share by setting a low price initially, freemium pricing offers basic services for free while charging for premium features, and loss leader pricing involves selling a product at a loss to attract customers to buy other profitable items. Each of these strategies has unique objectives and contexts in which they are most effective.