Description
A number of factors contribute to the pricing strategies for a product. Considering the segments in the simulation, what pricing strategy would be most effective considering both the market’s needs and the product life cycle? As the product moves through the life cycle, how should the pricing strategy change?
Rufina Chukwu
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Hey class,
Considering the segments in the simulation, what pricing strategy would be most effective considering both the market’s needs and the product life cycle?
Price is the value put on a product or service that results from a complex set of calculations, research understanding, and risk-taking ability. A pricing strategy considers segments, ability to pay, market conditions, competitor actions, trade margins, and input costs, among others. It is targeted at the defined customers and against competitors.
Pricing Setting a low initial price on a new product to appeal immediately to the mass market is penetration pricing, the exact opposite of skimming pricing, when considering a product’s life cycle and market needs, penetration pricing can be an effective pricing strategy. Penetration pricing involves setting a low price to attract customers and establish brand recognition. Once the product is established, the price can increase. Amazon consciously chose a penetration strategy when it introduced its new generation Amazon Kindle Fire tablet computer at $49.99. The average price of competitive models was $323.8. Kerin, and Hartley (2022)
As the product moves through the life cycle, how should the pricing strategy change?
Product life cycle pricing is a strategy that adjusts pricing based on a product’s stage in its life cycle. The concept of the product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline.
The introduction stage of the product life cycle occurs when a product is introduced to its intended target market. During this period, sales grew slowly, and profit was minimal. During the introduction, pricing can be either high or low. A high initial price may be used as part of a skimming strategy to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers. Kerin, and Hartley (2022)
Growth: Pricing can fluctuate based on availability, features, and benefits.
Maturity: Competitive pricing may lead to decreases.
Decline: Many businesses choose to lower prices. Some pricing strategies include a discount.
Personally, brands could for example use a price skimming strategy for the different stages of a product life cycle: when customer demand is high due to a new release, the price is set to attract the most revenue. After the initial fervor and hype wanes, a brand adjusts price points to suit more consumers in the market. Also, pricing should align with the customer’s willingness to pay, which is constantly changing. It responds to market trends, competitors’ pricing, and the evolving sophistication of your products.
References:
Kerin, R., and Hartley, S. (2022). Marketing: The core (9th ed.). McGraw Hill. ISBN-13: 9781260729184.
Thank you for the time to read my post.
Rufina Chukwu.
