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    Chapter 8

    Uploaded by

    Viên Thùy

    Copyright:

    © All Rights Reserved
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    Chapter 8

    Uploaded by

    Viên Thùy
    5 views14 pages

    Copyright

    © © All Rights Reserved

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    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    5 views14 pages

    Chapter 8

    Uploaded by

    Viên Thùy

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 14

    Chapter

    8: Pricing Over the


    Product
    Life Cycle
    Adapting
    Strategy in an
    Evolving Market
    1
    1. NEW PRODUCTS AND THE PRODUCT
    LIFE CYCLE
    o 2 reasons make new product pricing especially
    important:

    • Represent a primary source of organic volume


    & profit growth.
    • Creates opportunity to reengage with customers to
    changes what and how they purchase

    o If priced too high/ too low at launch, what will happen?

    o As a result, new product launches represent one of


    the best opportunities to introduce value-based
    pricing to a market.

    3
    PRICING THE INNOVATION
    FOR
    MARKET INTRODUCTION

    Recognition of diffusion process is extremely


    important in formulating pricing strategy:
    • Create long-run demand for an innovative product at
    any time
    in the future depends on the number of initial buyers

    • The early adopters are people particularly suited to


    evaluate the product before purchase

    4
    PRICING THE INNOVATION
    FOR
    MARKET INTRODUCTION
    o Recognize consumers’ price sensitivity
    o Consider the value message that various list price strategies
    send to the market
    ex: skim-pricing strategy: the list price should be near the
    relative value that early adopters will experience

    o To innovation product, should not set a list price for


    market penetration due to the price–quality effect,
    damage the product’s reputation.

    5
    Value Communication
    Approach

    oCommunicating Value with Trial Promotions

    oCommunicating Value with Direct Sales

    oMarketing Innovations Through


    Distribution Channels

    6
    2. PRICING NEW
    PRODUCTS FOR GROWTH
    o Once a product concept gains a foothold in
    the marketplace, the pricing problem begins
    to change

    o In growth, therefore, the buyer’s concern about


    the product’s utility begins to give way to a
    more calculating concern about the costs and
    benefits of alternative brands

    o Two market strategies:


    • Pricing within a Differentiated Product Strategy

    • Pricing within a Cost Leadership Strategy

    7
    Pricing within a
    Differentiated
    Product Strategy
    o Skim pricing to the segment that values the
    product most highly.

    o Penetration pricing is also possible for a differentiated


    product. This is common in industrial products where a
    company may develop a superior piece of equipment,
    computer software, or service, but price it no more
    than the competition.

    8
    Pricing within a Cost Leadership
    Strategy
    oPenetration pricing often plays an active role in
    the strategy’s implementation.
    • Wal-Mart uses this strategy successfully to
    achieve substantial cost economies in distribution
    and high sales per square foot.
    oIf a market is not particularly price sensitive, penetration
    pricing will not enable a firm to gain enough share to
    achieve or exploit a cost advantage
    oNeutral pricing is the most appropriate pricing strategy
    and can still be consistent with the successful pursuit
    of
    cost leadership.
    9
    oPenetration pricing is not always appropriate when
    cost leadership is based on a narrow customer focus

    10
    3. PRICING THE
    ESTABLISHED PRODUCT
    IN MATURITY
    Pricing is further reduced by:
    1. The accumulated purchase experience of repeat buyers
    2. The imitation of the most successful product
    designs, technologies, and marketing strategies
    reduces product differentiation.
    3. Buyers’ increased price sensitivity and the lower risk that
    accompanies production of a proven standardized product
    attract new competitors

    Some ways to solve problem:


    + Unbundling related products
    + Improved estimation of price sensitivity
    + Improved control and utilization of costs
    11
    + Expansion of the product line
    + Reevaluation of distribution channels.

    12
    4. PRICING A PRODUCT
    IN MARKET DECLINE
    3 strategies in the decline stage:
    o Retrenchment: partial or complete capitulation of
    some market segments to refocus resources.

    o Harvesting: A phased withdrawal from an industry.

    o Consolidation: An attempt to gain a stronger position in


    the declining industry.

    13

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