Class16_HW_Assignment - 1. Prices are typically set high...

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1. Prices are typically set high during the introductory stage of the product life cycle (PLC). In part, this is done in the hopes that development costs may be recovered quickly. Also, at this stage demand is primarily associated with the customers whose needs ideally match the products attributes and thus, price will not significantly affect demand. For example, the Xbox 360 was priced at $299 at the time of its initial release, an amount that dropped considerably after the introductory stage of the PLC. However, in price sensitive markets, the product may be initially priced at the market level or lower. For example, New Balance sneakers are often initially offered at prices similar to the competition because the budget sneaker market is price sensitive. Prices typically stabilize during the growth stage, as: (a) competitors have entered the market, thus increasing the supply, (b) the product has begun to appeal to a broader market, such as lower-income groups, and (c) economies of scale are lowering costs and therefore the savings can be passed on to the consumer via lower prices. For example, the Sony HX5V digital camera, which was initially offered at $399, dropped to $349 as it entered the growth stage. During the maturity stage, prices typically drop even lower as competition increases and inefficient, high-
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Class16_HW_Assignment - 1. Prices are typically set high...

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