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3 Cards in this Set
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What is New Product Development? |
This is the development of original product improvement, product modifications and new brands through the firm's own product development. There are two ways you can go about pricing (pricing strategy) when just entering the market: 1) Market Skimming 2) Market Penetration |
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What is Market Skimming? |
This is setting high prices for new product to maximum revenue skimming layer by layer for those who willing to pay high prices. EXAMPLE: Iphone
Considerations • Product quality and image support it's price • Buyers are willing to pay that price • Cost of producing in smaller volumes should not cancel out the advantage of higher prices. • Competitors should be able to enter the market
Think
These companies set premium for higher revenue. They that someone will not afford it when it drops so what they do is, they serve ones first that can pay set prices for it and then they skim it little by little until the price drop. And as the price more can affords it as market starts to gain newer products this one is going to drop for normal people to purchase at lower prices. This happens with companies that have anticipated products. |
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What is Market Penetration? |
This is setting low prices for new product to attract large amount of buyer and larger market share. EXAMPLE: digicel entering the Jamaican market.
Considerations • Price sensitive market • Inverse relationship of product and distribution costs to sales growth • Lower prices should keep competitors out of the market
Think They start the product out with low prices so imagine a person goes into a cosmetics store to buy a product that they often use and they so happen to come across your product they the price notice they probably save little money this week and buy your product instead of the one they initially sought to purchase or they just want to try the product and purchase both your brand and the one they came for. If they like it they may start buying your product and soon or later the product has more brand awareness as well as loyal consumers. Then the company will continuously patiently increase the price as time passes. |
