Question

How do pricing strategies differ when introducing new products?

Answer 1

How much should you charged for a new product? Charge too much and it won't sell - a problem that can be fixed relatively easily by reducing the price. Charging too little is far more dangerous: a company not only forgoes significant revenues and profits but also fixes the product's market value position at a low level. And as companies have found time and again, once prices hit the market it is difficult, even impossible, to raise them.

New products have a protected distinctiveness which is doomed to progressive degeneration from competitive inroads. The invention of a new marketable specialty is usually followed by a period of patent protection when markets are still hesitant and unexplored and when product design is fluid. Then comes a period of rapid expansion of sales as market acceptance is gained.

Next the product becomes a target for competitive encroachment. New competitors enter the field, and innovations narrow the gap of distinctiveness between the product and its substitutes. The seller’s zone of pricing discretion narrows as his or her distinctive “specialty” fades into a pedestrian “commodity” which is so little differentiated from other products that the seller has limited independence in pricing, even if rivals are few.

Policies for Poineer pricing:

1) Skimming Pricing

2) Penatration pricing

3) Economy pricing

4) Segmentation pricing

5) Pricing at premium

6) Psycology pricing

Each pricing stategy has its own advantages and disadvantages. So based based market conditions like demand, market growth, Competitiors, etc will inflence the price.