Marketing innovation through price

Abstract

The factors that influence pricing strategy change over the life of a product concept. The market defined by a product concept passes through four phases: development, growth, maturity, and decline. Briefly, the changes in the strategic environment over those phases are as follows: Market development. Buyers are price insensitive because they knowledge of the product’s benefits. Both production and not a threat since the potential gains from market development exceed those from competitive rivalry. Pricing strategy signals the product’s value to potential buyers, but buyer education remains the key to sales growth. Market growth. Buyers are increasingly informed about product attributes either from personal experience or from communication with innovators. Consequently, they are increasingly responsive to lower princes. If diffusion strongly affects later sales, price reductions ca substantially increase the rate of market growth and the product’s long-run profitability. Moreover, cost economies accompanying growth usually enable one to cut price while still maintaining profit margins. Although competition expansion, generally precluding the advent of price competition. Price-cutting to drive out competitors may occur, however. Cost advantages associated with sales volume are substantial if current market share is expected to determine which competing technology becomes the industry standard, or if capacity outstrips sales growth.