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2.
Price
Changing
the product to reflect the product's life cycle is only part of
the essence of a well balanced marketing mix, and so PRICE enters
the second important consideration of the marketing mix.
When setting a price on a range for your products, you need
to ensure that you can recoup any overheads, compete with rival
companies and charge a price your customers are willing to
pay. To do this you need to fine tune your pricing
policy and you could achieve this in a number of ways:
Loss
Leader Pricing
This involves lowering prices on a number of key products in
order to attract a customer to purchase the products.
Customers obviously like a bargain and like may be
attracted to buy this item even if they had never considered
purchasing this item before.
Price reductions could be used to entice customers to look
at your other products, and any profit lost might well be made up
should the customer be persuaded to shop around and purchase other
produces not reduced in price. Loss leader pricing might be used
to sell off or stimulate interest in products considered to be in
the maturity or decline stage of their life cycle.
Penetration
Pricing
This type of pricing is used for products identified as being in
the "introductory" stage of the product life cycle to
enable the product to get a foothold in the market.
Prices are artificially reduced to attract the largest
possible audience. It
is often used to prevent or discourage competitors from capturing
the market and used for products that are mass-produced.
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Price
Skimming
Where Penetration Pricing keeps the pricing below the real market
price, price skimming raises the price artificially to enable it
to quickly recoup costs and for immediate profit. This type of
pricing structure works very well for products that are in demand
or where there are few competitors - electronic equipment for
example. Caution has to be used when employing this strategy as
competitors may well take advantage of these high prices and enter
the market quickly with a realistic price thus stealing the
market. Again this type of pricing strategy might be used when the
product is in its growth stage in the product life cycle as demand
is high and sales are high.
Differential
Pricing
This involves allowing the same product to be priced differently;
this can be justified when the product is sold in areas with
differing economic climates, when sold through differing
distribution channels, to appeal to a different market segment.
For example, you could choose to charge a wholesaler less
for buying in bulk than for an individual who only bought on
single card. you
could also decide to charge more for your card designs in London
than you would in the North of England simply because the economy
is more stable in London than in the North of England.
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