Module8(fom) - Dissertation Example

Pricing Part I New Product Pricing Strategy There are a number of pricing strategies available to the launch of a new product such as an innovated, technologically driven IPad. In general, pricing strategies depends on both marketing and pricing objectives, markets for the product, the level of differentiation attached to the product, the product’s life-cycle and any number of other factors (Armstrong and Kotler 2011, p. 313). In determining what pricing strategy to use with the launch of a new IPad, management can choose between price skimming or penetration pricing (Armstrong and Kotler 2011, p. 313). Price skimming would be a useful tool for staving off demand when the number of IPads produced is low.

Price skimming occurs when the introductory price is relatively high reflecting that the IPad is innovative and there is a degree of “prestige or status” attached to owning the IPad (Pride, Hughes and Kapoor 2010, p. 336). Assuming that the targeted consumers care about prestige and status, and that the cost of research and development that went into developing the IPad is high, price skimming is useful for meeting the cost of development and the needs of the targeted consumers. It will also ensure that demand for the product will not outweigh supply if supply is relatively low.

Penetration pricing however may not be desirable since it assumes that there is a high supply of the product and there is a low demand. This is assumed because penetration pricing is structured around low pricing with the objective of creating market shares for the new product. It is hoped that setting low prices will discourage rivals’ entry into the market (Pride, Hughes and Kapoor 2010, p. 336). This is an undesirable approach to the introduction of a new technologically driven product as the market is filled with these kinds of products and the only way to penetrate the market is to introduce something that is new and better.

A low price will automatically give the impression that the product is either no different from other products or inferior to existing products. Part II Why Product Line, Product Mix Strategy Product lines refer to products that are only different in minimal ways. Product lines are mixed or expanded for a number of reasons. Invariably the reasons for expansion and/or mixing are related to the product itself and its relationship with consumer preferences and attitudes and marketing objectives (Armstrong and Kotler 2011).

With respect to the product itself, marketers are aware that each product cycle has a maturity phase. If maturity is lasts for a long time, a new product will only have to be introduced later. However, if the maturity stage is short a new product will have to introduced at an earlier stage (Pride, Hughes and Kapoor 2010, p. 320). From the perspective of the consumer, marketers are aware that consume preferences and attitudes toward a product change over time. Therefore product mixing or expansion will have to be consistent with these changing dynamics.

Likewise, from a marketing perspective, a company may have to respond to excessive marketing of a product or there may an issue with respect to “production capacity” (Pride, Hughes and Kapoor 2010, p. 320). For instance, a health conscious product by a competitor may be gaining a market share. The marketing department may find it useful to extend an existing product or mix it with a health conscious product to regain or take a share of the market. Bibliography Armstrong, Gary and Kotler, Philip 2011, Marketing: an introduction, 10th edition, Pearson Prentice Hall, USA. Pride, W. M.

; Hughes, R.J. and Kapoor, J. R. 2010. Foundations of Business. South-Western Cengage Learning, USA.