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Pricing L4: Pricing Strategy (PLC) (KODAK Case (Relaunch/Repositioning to…
Pricing L4: Pricing Strategy (PLC)
News
Nutella Riot: Huge discount of Nutella goes into marketing budget because it increases awareness of Intermarche brand. Financed through increased amount of people buying other stuff.
Pricing Strategy
Product Life Cycle (PLC)
Introduction
Penetration Strategy
Aims on fast penetration in the market
Low prices to attract mass market
Competitive cost advantage
Stay out pricing: 'Prices so low, that it is not interesting for newcomers to engage in this market'
Necessary Preconditions
High price sensitivity of demand
Economies of scale must be attainable
Strong potential competition soon after introduction
No elite market available
Sufficient manufacturing capabilities available
Aim: Increase Market Share
Skimming Strategy
Aims on harvesting high price segment
Attacks elite market with loose price sensitivity
Based on uniqueness, cash flow is used to finance further growth
Necessary Preconditions
Price is not dominant variable of demand
Non-sensitive elite market available
Competition development rather slow
Aim: Make Profit
Growth
Increase market share: Lower price or increase over time
Maturity
Defend Market Share / or Relaunch by pricing at or below competition
Decline
Maintain efficiency: Set price to remain profitable or reduce to liquidate
Consumer Behaviour behind PLC
Innovators (2.5%)
Early Adopters (13.5%)
Early Majority (34%)
Late Majority (34%)
Laggards (16%)
Critical Analysis of PLC
Popular and enduring framework
Simple, some validity, allows assessment what markting activities are most appropriate at each point of time
Potential Problems
Trouble with identifying correct product stage
Difficult to forecast sales level, length and shape of each stage
Should be used to determine product form (LCD TV) / product class (TV general). Should not be used to describe brands, Styles, Fashion or Fads which can change quickly and decline fast
KODAK Case
Originally skimming strategy: Premium products with premium prices
Introduced lower priced product to encounter competition
Sales through discount/department stores, drug stores, camera shops, supermarkets, convenience stores, wholesale clubs, mail order
No real quality differences across products and brands
50% of consumer had little knowledge of photography and saw it as commoditiy (hence price sensitive)
Relaunch/Repositioning to defend market share in maturity phase
GoldPlus as flagship brand: good quality, higher price
Royal Gold instead of Ektar: Superremium for special occasions
Funtime: Economy version
Questions
Describe Kodaks Situation
Entered maturity period after successful skimming strategy, increased price sensitivity in market and more competition, disruptive innovation of segment is about to happen
What should be their objective?
Focus on Professionals/Serious amateurs, Polaroid, and mobile phone photography technology
Funtime proposal
Too careful, only at special occasions and no advertising
Culture was a problem --> Reluctant with digital because it killed what the brand stands for
Extending Product Life Cycle
Advertising
Price reduction
Adding value
Explore new markets
New packaging