What term describes setting prices high for luxury products to target affluent customers?

The term that describes setting prices high for luxury products to target affluent customers is skimming pricing. This strategy involves establishing a high price at the initial stage of a product's life cycle to maximize profits from customers who are willing to pay more for exclusivity and luxury. By doing so, businesses can create a perception of premium quality and desirability among affluent consumers.

Skimming pricing is particularly effective in markets where competition is limited, or when a product has unique features or high-quality attributes that justify the elevated price point. This approach also allows companies to recover their initial costs before they start to lower prices to attract more price-sensitive customers later on.

In contrast, the other pricing strategies mentioned serve different purposes. Value pricing focuses on providing competitive prices based on perceived value to the consumer, competitive pricing aligns prices with those of competitors to stay in the market, and penetration pricing sets low initial prices to quickly attract customers and gain market share.