Question

. Create a profitable pricing strategy for the following product and situation. Select a price point for your product and support/explain your strategy using marketing concepts. Based on a quick PLC (product life cycle) and new product adoption, how do you ensure the optimal profit level is reached?

• You are an existing tech company in healthy financial position

• Releasing a radical new tech product, patent pending

• Oligopolistic competition

• Your cost: $187.39 per unit

• Competitor’s price for similar yet less innovative product: $249.99

• Approximate factory capacity: 20,000 units/week

Answer 1

Let us first understand the quick product life cycle and its implications. A quick product life cycle means the product will reach maturity level quite fast and then after-sales will start declining all this will happen in a relatively short span of time.

another fact is to note that the adoption rate of the new product is also high, it means that the product which is developed through innovation.

Therefore, the pricing strategy should be more of skimming the profit before the products lose their competitive advantage due to innovation.

Since the product is being manufactured in large quantity therefore, the premium pricing strategy will not fit.

At present, the company has kept the prices much lower than the competition in an oligopolistic market it indicates the economy pricing strategy, which is not the right strategy for the product which has got a more competitive advantage because of the product being tech product and based on innovation.

Therefore, in my recommendation, the product should be priced at part with competition to skim the profit until the time product reaches the maturity level and sales start to decline. In an oligopolistic market it is relatively easy to benchmark the price and since in this case the direct competition is from the one main competitor, the company must price similar to them in order to establish the product's unique offering due to higher degree of innovation.