A number of factors contribute to the pricing strategies for a product. Consider
ID: 3201094 • Letter: A
Question
A number of factors contribute to the pricing strategies for a product. Considering the workhorse segment in the simulation, what pricing strategy would be most effective considering both the market's needs and the product life cycle? As the product moves through the life cycle, how should the pricing strategy change?
A number of factors contribute to the pricing strategies for a product. Considering the workhorse segment in the simulation, what pricing strategy would be most effective considering both the market's needs and the product life cycle? As the product moves through the life cycle, how should the pricing strategy change?
A number of factors contribute to the pricing strategies for a product. Considering the workhorse segment in the simulation, what pricing strategy would be most effective considering both the market's needs and the product life cycle? As the product moves through the life cycle, how should the pricing strategy change?
Explanation / Answer
What pricing strategy would be most effective considering both the maket's needs and the product life cycle:
The pricing strategy should be changed according to the product life cycle: introduction, growth, consolidation and decline phase.
(i) Introduction stage: The product is promoted to create awareness and develop a market for the product.
In this phase, pricing is low, in order to build market share rapidly.
(ii) Growth stage: In this phase of life cycle, competitors are attracted into the market with similar offerings. Here, pricing is maintained as the firm enjoys increasing demand.
(iii) Maturity stage: I this phase, the strong growth in sales diminishes. So, the primary objective at this state is to efend market share while maximizing profit. In this phase, the pricing may be lower because of new competition..
(iv) Decilne state: This phase occurs due to sales decline because of downturn in the market. There are several reasons such as introduction of more innovative product, consumer taste change etc. At this time, price cutting is a must and withdrawal of many products from the market are warrented and profit can be improved by reducing market spending and cost reduction.
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