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Pricing across the Product Lifecycle (3. Maturity Stage (Growth has…
Pricing across the Product Lifecycle
1. Intro Stage
Market may be very young in terms of a new product: might not be a lot of competition
Tech might be a bit more expensive bc it's not standardised yet
In a market w/ lots of competition
penetration pricing
makes sense
In a market w/ low competition or w/ a very innovative product
skimming
could be used as customers have nothing to compare it with
The company also may not be able to afford any other approach at this point
2. Growth Stage
New competitors entering the market; stable technology; new customers - may start to think about
dynamic pricing
Dynamic pricing is interesting in a growth market bc there's so much going on
Segments will be starting to reveal themselves so could use
segmented pricing
3. Maturity Stage
Growth has stopped; shakeout is happening w/ less-efficient competitors + there isn't as many new ones
If entering the market, may use
penetration pricing
to get a share of established competitors/ those who have left
Could use
break-even pricing
if established bc after the growth period business operations are more predictable + costs can be measured more effectively
BUT, generally in a big competitive market you'd be thinking about bringing prices down
Could potentially use
negotiated pricing
: business could be overstocked at this point + so may need to offload some to free up production capacity/put cash into new products + stretch out the maturity period
Segmented pricing
would be good to consider: how long maturity lasts depends on the ability to deliver a good product. This means a deeper understanding of customers is more important than price
4. Decline Stage
Could get value from
penetration pricing
: picking up market share others have left. However generally the market is shrinking
Could go for
skimming pricing
bc will have loyalty from laggards who don't want to change - however, this is potentially exploitative. May be justified bc selling fewer products so need to make more money on them