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Unformatted text preview: ife cycle, discuss pricing strategies
appropriate for that stage.
INTRODUCTION. Generally, prices are set high in the introduction stage to recover
developmental costs. However, pricing strategies followed in this stage depend on elasticity of
demand. If demand is inelastic, a high introductory price is warranted. If demand is elastic and
consumers are price sensitive, the price should be set at the market level or lower.
GROWTH. Price may stabilize at this level as competitors enter the marketplace. Price may fall
somewhat as economies of scale allow lower costs to be passed on to the consumer in the form of
MATURITY. This stage brings on further price declines as competition increases and inefficient,
high-cost firms are eliminated. Remaining competitors typically offer similar prices. Price
increases are cost initiated rather than demand initiated.
DECLINE. In the final stage of the product life cycle, prices may decline even further as the few
remaining competitors attempt to salvage the last vestiges of demand. If only one firm is left in
the market, prices will stabilize or even rise as the product becomes a specialty good.
KEY: CB&E Model Pricing OBJ: 19-6 TOP: AACSB MSC: BLOOMS Synthesis 17. How does price interact with the other three Ps of the marketing mix?
PRODUCT. The product life cycle stage and the perceived relationship of price to quality of the
product affect its price. Some students may also mention that price levels must be set according to
the cost of the product, demand for the product, and elasticity of demand for the product.
PLACE/DISTRIBUTION. Adequate distribution of a new product can often be attained by
offering a large profit margin to distributors. Price can be set higher than normal if the product is
distributed to outlets that are convenient to the consumer. Manufacturers can also gain more
control over price by using exclusive distribution, franchising, or avoiding doing business with
PROMOTION. Price is often used as a promotional tool to increase consumer interest. Special
low prices are often advertised as an inducement. Discount coupons, cents-off campaigns, price
rebates, and other discounts are all price-promotion marketing tools. Trade promotions also are
KEY: CB&E Model Pricing OBJ: 19-6 MSC: BLOOMS Synthesis 18. What is the impact of the Internet on pricing strategies?
ANS: TOP: AACSB The Internet is enabling buyers to quickly and easily compare products and prices, putting them
in a better bargaining position. At the same time, the technology allows sellers to collect detailed
data about customers’ buying habits, preferences, and even spending limits so that sellers can
tailor their products and prices. This raises hopes of a more efficient marketplace.
KEY: CB&E Model Pricing OBJ: 19-6 TOP: AACSB MSC: BLOOMS Synthesis 19. Discuss how consumers u...
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This document was uploaded on 09/29/2013.
- Fall '13