The pricing of a product is a real headache for many businesses. Establishing a price is a difficult task as it is necessary to take into account a lot of factors like:
1) whether the customer will perceive the price right for the product (not too low, not too high);
2) whether the competition does not offer similar products cheaper or more expensive;
3) whether distributors and dealers consider the price good for them to have profit, too.
Today I would like to speak about certain pricing strategies. I do not claim the list is exhaustive, but these strategies that can be easily discerned in the market.
CREAM-SKIMMING STRATEGY
Within this strategy a company launches a unique product. Consumers are ready to pay more for this product than it really costs. This situation lasts as long as the competition reacts. Once there are competitive products, the price falls.
iPhone can serve a good example for this situation. Its initial price of over USD600 is way too high for such a device, taking into account prices for mobile phones and PDAs. But its unique combination of functions and options with a supreme design makes the product unique in its sense. Until now there are no close competitors and Apple keeps on skimming the cream.
FOLLOW-THE-MARKET STRATEGY
When the market is already developed and it grows, sometimes it is vital to follow the market in order to survive on it.
For instance, in Eastern Europe the market of PVC windows is stably growing these years. First, PVC products were imported. Their prices were really high. Then, local companies adopted the manufacture of PVC windows and prices dropped significantly. Foreign companies had to also organize local production to
>> to keep up with the market by reduces expenses;
>> to stay in the market.
MARKET PENETRATION STRATEGY
This strategy is used actively by companies willing to take up a good share of the market, where they were not present. They set the lowest possible prices. This dumping strategy makes the product less attractive for other competitors unable to sell it at this low price. First, the company is in the red, then, by selling massively, it recuperates all expenses.
Unfortunately, this strategy can destroy markets and can lead to monopoly, which is illegal in certain countries.
Some additional reading on the topic:
Is the Apple iPhone Overpriced?
Marketing – Price strategies and adjustments
Tags: b2b, business, marketing, new product launch, price, pricing, strategy
March 10, 2008 at 13:51 |
Ooh, this is REALLY helpful. Our first product will have no competitors, but I can’t expect to have a monopoly for longer than 2 months.
March 10, 2008 at 20:31 |
So you are in the skimming strategy. Your only worry should be your competition and how active they are after your product’s launch. Hopefully, they are slow and you benefit from the new product you have.
March 13, 2008 at 04:20 |
This is great , I will follow what you said, but with out products info.
March 16, 2008 at 11:27 |