Pricing Strategies - Pricing Strategies - topics include: o...

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Pricing Strategies - topics include: o new-product pricing strategies o product-mix pricing strategies o price-adjustment strategies o strategies for initiating and responding to price changes New-Product Pricing Strategies - pricing strategies usually change as the product passes through its life cycle - a company that plans to develop an imitative new product faces a product-positioning problem; it must decide where to position the product versus competing products in terms of quality and price - four possible positioning strategies: - premium pricing strategy – producing a high-quality product and charging the highest price - economy pricing strategy – producing a lower quality product but charging a low price - good-value strategy represents a way to attack the premium pricer; it says, “We have high quality, but at a lower price.” - overcharging strategy – the company overprices the product in relation to its quality - companies bringing out an innovative, patent-protected product face the challenge of setting prices for the first time. They can choose between two strategies: o market-skimming pricing o market-penetration pricing Market-Skimming Pricing - setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price - the company makes fewer but more profitable sales - market skimming makes sense only under certain condition: o the product’s quality and image must support its higher price, and enough buyers must want the product at that price o the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more o competitors should not be able to enter the market easily and undercut the high price Market-Penetration Pricing - setting a low price for a new product in order to attract a large number of buyers and a large market share - several conditions favor setting a low price: o the market must be highly price sensitive so that a low price produces more market growth o production and distribution costs must fall as sales volume increases o the low price must help keep out the competition – otherwise the price advantage may be only temporary Product-Mix Pricing Strategies - the firm looks for a set of prices that maximizes the profits on the total product mix - the five product-mix pricing situations: Table 12-1 Product-Mix Pricing Strategies Strategy > Description 1. Product line pricing > Setting price steps between product line items 2. Optional-product pricing > Pricing optional or accessory products sold with the main product 3. Captive-product pricing > Pricing products that must be used with the main product
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This note was uploaded on 01/24/2011 for the course DEV COM Dev Com taught by Professor Profturo during the Spring '02 term at University of the Philippines Los Baños.

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Pricing Strategies - Pricing Strategies - topics include: o...

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