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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?
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Jan 4, 2024, 4:23 PM
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Kennon Nunez
Jan 6, 2024, 11:44 PM
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Pricing Strategy in the Simulation
Pricing is a crucial component of the marketing mix since it increases sales and profits for the business. To generate greater demand and boost sales of its goods and services, the business must select the best price plan.
A company’s product pricing strategy varies based on the demands of the market and the product life cycle. During the product launch and initial phase of the market, the company has the option to select between a market penetration or market skimming approach (Kerin & Hartley, 2022). A corporation can use a skimming strategy to demand high prices up front and keep all of the earnings, similar to what Samsung has done, if the brand is well-known and has a global reach. However, when a brand is fresh to the market, it will charge less to gain traction.
Now, when considering the segments within the simulation, I would exercise penetration pricing to gain market share quickly by setting a low initial price to attract early adopters and build brand awareness. This strategy can help in quickly establishing the product in the market and capturing a customer base.
Pricing Strategy Changes
As products move throughout the life cycle, the pricing strategy will change with it. During the growth stage, when the product is beginning to garner interest and demand, the company has the option to charge competitive or value-based prices (Kerin & Hartley, 2022). Value-based pricing works well when there are few competitors since the company sets prices depending on how much the customer values the product. Competitive pricing should be used to address competition if there are currently more rivals.
When a business reaches maturity, it faces numerous competitors and is no longer growing (Kerin & Hartley, 2022). In order to maximize demand, businesses in this situation must employ low-cost pricing, which involves offering their products at a reduced or discounted price.
When a product is in decline, demand for it has decreased (Kerin & Hartley, 2022). At this point, the corporation has the option to discontinue the product or sell it in conjunction with other goods or services by using bundle pricing.
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References
Kerin, R., and Hartley, S. (2022). Marketing: The core (9th ed.). McGraw Hill. ISBN-13: 9781260729184
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