Sunday, December 6, 2009

Case Analysis: Pricing the product

Unfortunately, I couldn't attend the marketing class on pricing strategy. While browsing through a relic of history known as previous year's Marketing 280 blog (b'cause no one reads it these days), I came across a thought-provoking case question developed by Mr. Osama Hafeez (yes alone), Business junior, pertaining to the pricing strategy of a product. Here's what he has to say:
Case:

If I say I have made an innovative product, it's totally a new product concept, and I want to price it. The economy is in downturn (recession). How should I price the product? Of course, the price would be above the cost line. Normally, the companies set economy-inspired prices. But is this a sound strategy? Do customers always want cheapest prices?
Can lower price actually hurt rather than helping? Will it generate long-term negative perception about the product? (Example: Imagine Mercedez Does that)

(Note: This case has been totally developed by me (Mr. O. H.) and I want an “awesome” discussion regarding this topic (so do I).)
Read the comments of your class fellows here. I don't know anything about the pricing concepts, so what's your answer to his queries?

1 comments:

Aqsa Bashir said...

Umer i think it all depends on the product whether its a high cost good or low.

Remember when wall's doughnut ice-cream came out it was priced at Rs 15 it sold like hot cakes for about 2 months phir all of a sudden they stopped selling it. A month later it came back smaller in size and at Rs. 20. (nt fair :{) Sales hit a high mark initially but then it dropped. Walls did make a good profit out of a low price and comparatively, a not so good profit from a high price.

Go back to 1957 when the first digital watch was made.
Before the watch companies could 'do away with' the analogue watch though, they first had to bring down the price of the digital successor. Competition in the digital field increased and by 1975 there were over 80 varieties available with a price of $20 (halved by the following year). This *competition helped to bring prices down* and the watches accessible to the common man.

The book talks about the Sony Bravia which skimmed the maximum amount of revenue by setting a high price.
See so it all depends on what you sell and to whom.