The document discusses pricing strategies for new products. It outlines 3 forces of pricing: price conveys image, competition & pricing, and focus on value. When introducing a new product, the price should satisfy 3 objectives: getting the product accepted, maintaining market share as competition grows, and earning a profit. There are 3 basic strategies for pricing a new product: market penetration, skimming, and sliding down the demand curve.

1. CHAPTER 10 DISCUSSION QUESTIONS
1) State & summarize the 3 forces of pricing.
2) Explain what customized or dynamic pricing is.
3) Explain the 3 objectives for establishing a new product's
price.
4) Explain the 3 basic strategies for establishing a new
product's price.

2. 3 FORCES OF PRICING

3. 1) PRICE CONVEYS IMAGE
-CUSTOMERS LOOK AT PRICES TO DETERMINE WHAT TYPE OF BUSINESS THEY
ARE DEALING WITH.
-HIGH PRICES CONVEY:
1) QUALITY
2) PRESTIGE
3) UNIQUENESS
-ONLY 15-35% OF CUSTOMERS CONSIDER PRICE TO BE THE CHIEF CRITERION
WHEN SELECTING A PRODUCT/SERVICE.
-CUSTOMERS ARE WILLING TO PAY FOR:
1) EXTRA VALUE
2) CONVENIENCE
3) SERVICE
4) QUALITY

4. A WELL CHOSEN PRICE SHOULD DO 3 THINGS
1) ACHIEVE THE FINANCIAL GOALS OF THE COMPANY.
-WILL THE PRICE LEAD TO PROFITABILITY?
2) FIT THE REALITIES OF THE MARKETPLACE.
-WILL CUSTOMERS BY AT THAT PRICE?
3) SUPPORT A PRODUCT’S POSITIONING.
-IS THE PRICE CONSISTENT WITH THE BRAND?

5. 2) COMPETITION & PRICING
TWO FACTORS WHEN TAKING COMPETITION INTO
ACCOUNT FOR A PRICING STRATEGY
• THE LOCATION OF THE COMPETITORS.
• THE NATURE OF THE COMPETING GOODS & SERVICES.

6. 3) FOCUS ON VALUE
-THE “RIGHT” PRICE FOR A PRODUCT/SERVICE DEPENDS
ON 1 FACTOR:
-THE VALUE THAT IT PROVIDES FOR A CUSTOMER.
-2 ASPECTS OF VALUE:
1) OBJECTIVE VALUE
-THE PRICE CUSTOMERS WOULD BE WILLING TO
PAY IF THEY UNERSTOOD PERFECTLY THE
BENEFITS THAT A PRODUCT/SERVICE DELIVERS
FOR THEM.
2) PERCEIVED VALUE
-THE CUSTOMER’S OPINION OF A
PRODUCT’S/SERVICE’S VALUE TO HIM/HER
COMPARED TO PRICE.

7. INTRODUCING A NEW PRODUCT
THE 3 OBJECTIVES THAT SHOULD BE
SATISFIED WHEN PRICING ANY NEW
PRODUCT.

8. 1) GETTING THE PRODUCT ACCEPTED
-NO MATTER HOW UNUSUAL A PRODUCT IS, ITS PRICE MUST BE
ACCEPTABLE TO A COMPANY’S POTENTIAL CUSTOMERS.
-THE ACCEPTABLE PRICE RANGE FOR A NEW PRODUCT DEPENDS
ON THE PRODUCT’S POSITION.
1) REVOLUTIONARY PRODUCTS
-PRODUCTS ARE SO NEW & UNIQUE THAT THEY
TRANSFORM EXISTING MARKETS. THE PRICE RANGE
TENDS TO BE WIDE.
2) EVOLUTIONARY PRODUCTS
-PRODUCTS THAT OFFER UPGRADES & ENHANCEMENTS TO
EXISTING PRODUCTS. PRICE RANGE IS NOT AS WIDE AS
REVOLUTIONARY PRODUCTS.
3) ME-TOO PRODUCTS
-PRODUCTS THAT OFFER THE SAME BASIC FEATURES AS
EXISTING PRODUCTS ON THE MARKET. PRICE RANGE IS
NARROW.

9. REVOLUTIONARY PRODUCTS

10. EVOLUTIONARY PRODUCTS

11. ME-TOO PRODUCTS

12. 2) MAINTAINING MARKET SHARE AS COMPETITION GROWS
-AS COMPETITORS ENTER THE MARKET, THE COMPANY
MUST WORK TO EXPAND OR AT LEAST MAINTAIN ITS
MAKET SHARE.
-CONTINUOUSLY REAPPRAISING THE PRODUCT’S PRICE
HELPS TO RETAIN A SATISFACTORY MARKET SHARE.
3) EARNING A PROFIT
-MUST ESTABLISH PRICE FOR A PRODUCT HIGHER THAN
ITS COST.
-CANNOT UNDERPRICE: MUCH EASIER TO LOWER A PRICE
THAN INCREASE ONCE THE PRODUCT IS ON THE MARKET.

13. 3 BASIC STRATEGIES FOR ESTABLISHING A NEW
PRODUCT’S PRICE

14. 1) MARKET PENETRATION
-TO GAIN QUICK ACCEPTANCE & EXTENSIVE DISTRIBUTION IN
THE MASS MARKET, COMPANIES SHOULD CONSIDER
INTRODUCING THE PRODUCT AT A LOW PRICE.
2) SKIMMING
-A COMPANY USES A HIGHER-THAN-NORMAL PRICE IN AN
EFFORT TO QUICKLY RECOVER THE INITIAL DEVELOPMENTAL &
PROMOTIONAL COSTS OF THE PRODUCT.
3) SLIDING DOWN THE DEMAND CURVE
-A COMPANY INTRODUCES THE PRODUCT AT A HIGH PRICE,
THEN LOWERS THE PRICE DUE TO TECHNOLOGICAL ADVANCES
LOWERING ITS COSTS BEFORE ITS COMPETITION CAN.