Dear Teacher, I am Hau Nguyen (Jack).

I would like to submit my “Week 3 – Pricing

Strategy” exercise as below:

Learning objectives:
1. What are pricing strategies that are appropriate for new and existing products?
There are some strategies appropriate for new and existing products:

Pricing strategies Definition

Skimming strategy The product starts with a high price and makes sure interested customers will

pay for it. Then when competitors come, the products will lower the price so

that they can compete with other competitors. Customers who were not

willing to pay the first high price can buy at a lower price.

Penetration strategy In the beginning, companies sell at lower prices to prevent competitors and

have a position in the market. Then they increase the prices to make more

profit.

Cost-based pricing Companies will calculate the cost to make the product and set a price by

adding a profit to the cost before selling to retailers. For instance, a cost-

based pricing strategy can be applied in military and building industries.

Demand-based pricing This strategy seems to be suitable for totally new products which can create

trends. Companies research to figure out how much money consumers are

willing to pay for the product and then set a price for this product at the

same.

For instance, Apple adopts a demand-based pricing strategy. They set prices

higher than competitors to position their products as premium

(FourweekMBA, 2024).

Dynamic pricing For example, in the hospitality industry, hotels and airlines use dynamic
 pricing to maximize profits during the high demand time and minimize the

loss of profits during the low demand times.

Prestige pricing Many customers believe that costly products are always good quality. So

companies try to build up their image and push the price of products higher.

This strategy may be suitable for rich customer levels.

Odd-even pricing Odd-even pricing is usually used in retail because customers think that

$99.99 or $99 sounds cheaper than $100 (Buynomics, 2024).

Loss leaders Companies offer a price that is lower than the manufacturing cost to attract

consumers. Then when customers visit stores, they may buy more expensive

products, not just promotional ones.

Bundling This strategy brings profits for both buyers and sellers. Companies can sell

more products and services.

2. What are the stages of the product life cycle?

The product life cycle involved introduction, growth, maturity, and decline.

 Introduction stage: at this stage, companies have to advertise to make their customers

aware of new products because customers may not be aware of the existing of new

products. Companies can use a skimming strategy to attract potential customers first,

then lower prices to appeal to the next level of customers.

 Growth stage: At this stage, products are aware by customers. Companies can

increase their production to maximize the profit. They also should continue

improving their products and determine their competitors.

  Maturity stage: Sales will pick up at this stage, which means companies maximize

their profit here. Companies also compete more with competitors and begin impact to

their business.

 Decline stage: Sales have decreased slightly in this state. Companies have to think

about new products, innovations, or improve the existing products.

References:

1. https://fourweekmba.com/apple-pricing-strategy/#:~:text=Apple%20adopts%20a%20premium

%20pricing,than%20similar%20devices%20from%20competitors

2. https://www.buynomics.com/articles/odd-even-pricing