![]() ![]() Thus, here, too, word of mouth has an effect. By pricing high the company attracts "early adaptors" who are often leaders and/or "show-offs" and thus give the product free publicity. The technique is well-suited for technology-based categories expected ultimately to have wide use. In the case of skimming, volume will, of course, be low but profits will be high. The product initially carries a very high price and is intended to gather a small, elite, but influential following. The other method of price-based product introduction is called skimming. The coupons may be actually part of the package so that no additional marketing steps are needed to get them to the consumer. The pricing intended to be used later is applied to the product in outlets, but coupons are distributed very widely and for a long period of time to let consumers acquire the product at its penetration price. To counter this problem, penetration pricing is sometimes used in a disguised form. If the low price becomes part of the brand image, changing price will disturb that image in the consumer's mind. The low initial price may build price expectations and it may be difficult, later, to raise prices without causing a market reaction. If the product is not very sharply differentiated from competitors' offerings (i.e., has "commodity" status), low prices may attract "switchers" while the price is low but won't build the desired brand loyalty: switchers will leave again. A new kind of candy, however, may be very elastic. They also have to buy gas at almost any price to get to work, alternatives being difficult to find and slow to develop. Gasoline purchases are relatively inelastic, for example, because people cannot store much gasoline. ![]() The technique is particularly applicable when demand for a product is very elastic, i.e., people will buy more when the price is low.
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