Pricing Over Product Life

Cycle
Pricing across Product life cycle
There are two strategies available for a new product which is in the
introductory stage of its life cycle;
• Skimming ( High initial price) strategy
• Penetration ( Low initial price) strategy
Skimming strategy
• This strategy is used for a distinctively new product which is to be
purchased by a market that is not sensitive to the initial high price. An
industrial marketer thereafter reduces the price to reach other market
segments that are more price sensitive.
Penetration strategy
• This strategy is effective when
• 1. Price elasticity is high or buyers are highly price sensitive.
• 2. Strong threat exists from potential competitors.
• 3. Opportunity cost exists to reduce the cost of production and
distribution with increase in volumes
Growth phase- price skimming

• Throughout the growth phase, businesses will be able to increase

production, which reduces the cost per unit. If a company can reduce
its product prices while maintaining healthy profits, then the
popularity of the product will continue to drive high profits
Maturity pricing stage
• Pricing strategy in this stage: Many businesses continue using the
competitive pricing strategy in the maturity stage. In fact,
competition is usually more fierce than in the growth stage. Consider
cutting your prices to keep customers, but don't go below your break-
even point.
Declining pricing strategy
• The final stage in a product’s life cycle is decline. There is less
demand for the product, and businesses must decide if they want to
discontinue the product or keep producing and selling it. Some
businesses that don’t pull the product add features to make it stand out
more and give it fresh life.