Over time, as its dominating market share discourages competition, Wow Wee could push up its prices. This strategy might give the company some competitive breathing room (potential competitors won’t be attracted to low prices and modest profits). Using penetration pricing, Wow Wee would initially charge a low price, both to discourage competition and to grab a sizable share of the market.Even without competition, they would likely lower prices gradually to bring in another group of consumers not willing to pay the initial high price. This approach would generate early profits, but when competition enters-and it will, because at high prices, healthy profits can be made in the market-Wow Wee would have to lower its price. With a skimming strategy, Wow Wee would start off with the highest price that keenly interested customers would pay.1 Figure 15.1: Sony’s robot dog, Aibo Skimming and Penetration Pricingīecause Wow Wee was introducing an innovative product in an emerging market with few direct competitors, it considered one of two pricing strategies: Parents could also monitor kids’ interactions with the robot through its video-camera eyes in fact, they could even use the robot to relay video messages telling kids to shut it off and go to sleep. Even higher up the price-point scale was the $3,600 iRobi robot made by the Korean company Yujin Robotics to entertain kids and even teach them foreign languages. Sony offered a pet dog robot called Aibo, but its price tag of $1,800 was really high. True, there were some “toy” robots available, but they were not nearly as sophisticated. When Robosapien was introduced to the market, it had little direct competition in its product category. We’ll begin by discussing two strategies that are particularly applicable to products that are being newly introduced.
Let’s look at several pricing options that were available to those marketers at Wow Wee who were responsible for pricing Robosapien, an example we introduced earlier. On the other hand, if you price too low, you might not make enough profit to stay in business. Or your company might even find itself facing competition from some other supplier that thinks it can beat your price. If a product or service is priced too high, many people simply won’t buy it.
#Pricing strategy trial#
Pricing a product involves a certain amount of trial and error because there are so many factors to consider. Pricing is such an important aspect of marketing that it merits its own chapter. Understand the stages of the product life cycle.Īs introduced in a previous chapter, one of the four Ps in the marketing mix is price.Identify pricing strategies that are appropriate for new and existing products.
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