Please enable JavaScript.

Coggle requires JavaScript to display documents.

Product life cycle., References. S, R. (s. f.). Pricing over Product…

- - - - Pricing strategy
        
        It establish a competitive price according to the target market taking into account a positionating strategy. Of it depends the initial price of a product and will determinate the next ones along of the PLC.
        If a company which fixes prices could reduce the freedom of do it according to the market conditions and marketing mix factors.
        Also, a company cannot change the price radicaly because if want to do that will need upgrade the product.
        If a company launch a competitors similar product will have to put it a similar price.
        If a company launch a different product than the competitors will have freedom to establish the price.
        
        Prices to maintain the status quo
        
        Neutral prices
        
        Introduction prices / Market penetration
        
        Price skimming
        
        1 more item...
        
        It is set a low price to approach the market massively. Or to approach a target market sensible to price. The most important is volume of sales over value.
        
        1 more item...
        
        Fixed prices according to the market and competitors. the strategy is reactive and does not matter establish high or low prices. if the demand is high the price will be increased and viceversa.
        
        It is to make face to competitors establishing a similar price that the competitors. It can be dangerous if the company does not take into a count the price of the product, the product themand or both things.
        
        Pricing steps.
        
        Establish price goals
        
        Forecasting of costs, demand and profits
        
        Choose a pricing strategy to fix a base price
        
        fine-tune the base price applying price tactics.
        The results conduct to the right price.
        
        Pricing tactics.
        
        Pricing tactics are implemented at the operational level. Through them, the company's pricing strategies are put into practice
        
        Promotional disacounts
        
        Temporary prices for products even lower than the normal price
        
        Usual prices
        
        Odd-even prices
        
        2 more items...
        
        The price is kept for a long term, but the amount or product quality increase or decrease. It is to keep the tradition.
        
        Fictitious discount prices
        
        Prices based on experience curve
        
        2 more items...
        
        Those are prices "before it was worth and now it is worth"
      - Goal of Product Line Pricing:
        
        Its goal is maximize profits and generate interest in the normal product to sell the upgraded product with a higher price using as a reference the primary product and its price. The more features offered, the more consumers will pay. will be sold
        Some products could not make profits, but the product line has to return a set of profits.
      - Price Leadership
        
        It happens when a company sets the price of products in its industry and other companies.
        A market leader sets, announce and can change the price of a product or service, and competitors feel compelled to match that price. Also it fixes the price by implicit agreement rather than formal agreement.
        It usually happens when the products are not highly differentiated and there is enough demand for each of the competitors follow being profitable after the price change. And it is common between oligopolistic companies.
        The leader can be the leader for a long time applying a definite and a consistent price policy and ussing its power with moderation.
        The leader change the prices if it feels that the costs and demand and demand conditions are permanent in order to keep the loyal customers.
        Leadership can prevail under both pure as well as differentiated oligopoly. And are called price followers who adjust the prices according to the leader prices.
        
        Dominant
        
        The leader firm is large and powerful enough to fix a price, that the othe companies have to follow. Each follower takes the market price as given and produces a product at which marginal cost equals marginal revenue. The dominant firm acts as a monopolist, who maximizes profit by taking the supply curve of the followers as given. While the followers offer products at competitive prices, dampening the control of dominant firm over the market price. The leader gets only the residual share of the market. If the market share of the followers goes up, the monopoly power of the leader suffers. The equilibrium price is lower than what would be obtained by a pure monopolist.
        
        Leader sets a very low price
        
        It usually force some companies to leave the industry.
        
        How it keep the dominance?
        
        Innovating on ‘non-price competitive areas’: new brands, product improvements, promotion, distribution, dealer concessions, free gifts, easier credit terms, free home delivery, after sales services, longer period of guarantee, etc. or by keeping the market price low enough to deter entry.
        
        Barometric
        
        Leader firm is regarded as a wise firm, that sets the price reflecting the market forces and the needs of other industry firms.
        A barometric company cannot change the prieces in an arbitrarily way.
        
        How price leadership arises?
        
        It arises through cost or productive capacity advantage.
        Low cost company can withstand the losses of a price war and grab leadership through lower price.
        When a company can increase market share by snatching large and profitable markets from conservative rivals.
        Who has the greatest interest in the welfare of the industry, has the greatest power to enforce monitoring and the greatest ability to forecast demand, being the best informed about market supply and demand conditions to determine industry-wide pricing policy.
        A company's long-term profit history, good management and product innovation can lead to price leadership.
- - - - a) New products
        
        a.2) Skimming
        
        a.1) Penetration
        
        It is a common product. Low prices to approach the maximum market share possible
        
        a.3) Neutral
        
        The price increase or decrease according to the product demand
        
        It can be an augmented product or a new product. High prices to reduce them with the time or keep them high as part of pricing strategy
        
        It is the previous stage, the company does not have sales, and is preparing a marketing mix, which can change according to the challenges and opportunities, to introduce the product.
        
        Product development
      - There are low sales until the customers know the product and its benefits.
        Some companies announce their products before the introduction stage, sometimes it can alert to the competitors.
        To increase the knowledge and get early custumers the advertising costs are high.
        A company can have additional costs by product distribution and low sales can provocate a losses stage.
        The main goal is establish a market and generate a demand of the product class.
        If the product fit perfecly to satisfy the need of cusumers the demand will be inelastic.
        
        Price under stage
        
        It is normally high using a skim pricing strategy to get a high profit margin to recovery the R & D investment quickly.
        But the company can use a penetration pricing strategy setting low prices to get a high market share or can use if the target is sensible to price.
    - - e) Decline
        
        Sales begin to decrease because the market is saturated, the product becomes technologically obsolete, or customer want a change. If the product has developed brand loyalty, the profitability can last more time. But, costs per unit may increase it turns in a decreasement of production volumes and then it ends stopping profit gaining.
        
        Price under stage
        
        Prices are decreased to liquidate inventory of discontinued products. Prices sometimes are kept and products serve a niche market.
      - Sales follow increasing but slowly, it is the most profitable stage. The brand is strong and advertising expenditures are low. Competition could decreased its market share and/or prices. And it is hard the differentiation of the product among competitors products. The goal is maintain market share and extend the product life cycle.
        
        Price under stage
        
        Possible price reductions to avoid a price war.
        
        Marketing.
        
        Sales promotion are offered to retailers to get more shelf space over other products and encouragement the competitors' customers to switch them increasing the product usage and turning non-users into custumers.
    - - Price under stage
        
        Prices are stable, competitora are entering into the market.
      - Marketing.
        
        Distibution expantion. Competitors enter to the market, the most common is that they enter in the growth stage.
        Price competition or promotional cost increase to convence the consumers about the product is better that the competitors product