Essay 3 - increase demand for the product but at the same...

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Andrew Lazarow A manufacturer decides to produce a high-quality desk and wants to price the desk far below comparable products. He believes by using this penetration pricing strategy he will be able to increase demand which leads to high sales, making up for the low price. By using a sales oriented strategy and starting at a low price the manufacturer is establishing a long term pricing framework in which the high quality desks will always be at a low price because if the manufacturer would realize that the price is too low and decides to raise the price, the quality of the desk and the perception of the desk in the eyes of the consumers can be changed for the worse. Because the manager is producing a high-quality desk, choosing a penetration pricing strategy is very risky. A high quality product will have high costs, so to make sure the manager earns high profits he will need to make sure sales are high. The penetration pricing strategy will help
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Unformatted text preview: increase demand for the product, but at the same time it also hurts the image of the product. By lowering the price of the desk far below comparable products the penetration pricing strategy makes the “high-quality” image seem like a lower quality. I believe it would be smart for the manufacturer to start with a different pricing goal. Starting with a product oriented strategy would be a better fit for the manufacturer’s product because it will help promote the high-quality image that the manufacturer is trying for. This way as the product ages the manufacturer will be able to lower the price without being at risk of hurting its profits. By having a price skimming pricing strategy the manufacturer will also be able to produce less of the high quality desk because the increased price will make up for the decrease in demand....
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