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Assignment On Managerial Economics Ii

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35 views4 pages

Assignment On Managerial Economics Ii

Uploaded by

Pui Puia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ASSIGNMENT ON

MANAGERIAL ECONOMICS II

TOPIC : PRICING OVER PRODUCT LIFE CYCLE

Submitted by

Lalsangzuala

2nd Semester

Roll No - 17
Pricing over product life cycle
Understanding the product lifecycle helps organizations to make better pricing decisions. With clear pricing
decisions you ensure that the product survives the cut-throat market competition and stays afloat no matter how
challenging the situation gets.

By pricing over product lifecycle you ensure that the buyers are enticed to choose a brand over the others time
and again. Pricing strategies can make or break a business!

The four Product Lifecycle Pricing Strategies


for different stages
1. Market Introduction / Development Stage
At this stage, the product emerges, develops its market and spreads awareness of its qualities as well as features.
In the initial stage, your business requires a significant investment of capital to manufacture products and to
promote it. The risk faced by businesses at this stage is generally high: focus is on the determination of the
right price point and finding their way to the minds of the consumers.

2. Growth Stage
By this stage, consumers are familiar with your product and your brand. Your focus should be on achieving a
more significant share of the market. Your product needs to stand out from the crowd. Marketing has a crucial
role here: if your marketing delivers, it automatically results in increased demand forecasts and
profit. Consumers are generally curious to purchase your product as they are attracted to the marketing
campaign.

3. Maturity Stage
Also known as the stage of saturation, businesses generally feel there is a sudden halt in revenue
development as sales begin to slow down. This affects the overall growth. In general, businesses at
this stage do not require funding and the brand / product stabilises in the market stage.

4. Decline Stage
This stage is often the most challenging for your product. The existence of your business faces risks
as it is affected by market saturation, high competition and interest changes of consumers.

To successfully survive throughout this stage and to ensure a continuation of the products market
presence, businesses start adopting aggressive marketing techniques. In other words, this is the “make
it or break it” stage.

Aspects that may affect your business at this stage:

• Change in the interest of the consumer


• Your brand cannot offer anything new to the market
• Your competitors outperform in the market
Pricing in the Introduction Stage
If your product is unique and consumers are introduced to something completely new, then the prices
can be fixed high. With high-prices, the massive development and promotional costs can be earned
back easily.

If the launched product already faces high competition, then you must set the price lower than average
to attract consumers to try out your new product.

Defining the price of a product in the initial stage is tricky. If your prices are too high, price-
sensitive customers may refrain from giving your product a try, and others may consider your brand
as being overly priced. On the other hand, if you set your prices too low, you might
be signalling poorer quality and consumers do not trust your product.

Whether your product is unique or not, you must understand what you are offering and bringing to the
market.

Pricing in Growth Stage


Once the market has accepted you as a business, you need to focus on retaining customers. This can
be done by lowering the prices. In the growth stage businesses can earn revenue to recover from the
initial investments and marketing expenditure as long as they are able to set the price high enough to
cover their costs.

Pricing in Maturity Stage


Competition at this stage gets fierce! Brands reach a saturation point by now, and revenue production
becomes very challenging. The successful way out through this is to invest in re-creating the product
and revamping it entirely to create curiosity in customers.

Maturity lifecycle stage pricing examples could be: introducing special discount or promotional
prices and period offer, providing privileges to the loyal members and introducing exclusive
membership offer. These tactics work better than reducing the prices as they create curiosity in
people.

Pricing in Decline Stage


As the market saturates and reaches its lowest, making drastic changes in the pricing helps meet the
business goals. Three major evils that come into play at this point are high competition, changing
customer needs and market saturation.
To tackle this stage, businesses and brands must reduce production costs and minimize production so
they won’t get stuck with a huge inventory they then are forced to sell off at a minimum price. The
focus must be to re-establish the name by adding new features to the product and advertise it to loyal
consumers.

The lifecycle stage price elasticity varies at each development stage. With the competition rising at
every stage, making a brand the top priority for the consumers becomes the most challenging part.

Through every stage that the product progresses the competition increases and makes consumers more
price sensitive.

Conclusion – Pricing over Product Lifecycle


The product life cycle pricing is a tool for the marketers, designers and management alike that
promises overall success of a product in a market. Businesses can derive the most value out of a
product/service with the help of smart pricing strategies. The rising sale will not always mean
progress; neither declining sales always indicate an ultimate doom.

If product pricing is based on understanding of its role and importance, then it can lead to consistent
sales for a business.

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