In the early stages of life cycle pricing, the marketing, operations, and financial managers decide what...
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In the early stages of life cycle pricing, the marketing, operations, and financial managers decide what the customer will value, how the firm can manage the supply chain to consistently deliver those characteristics, and how much it will cost, including the financing costs. If the value-based prices can cover this long-run full cost, the product becomes a prototype. Each proposed product or service then proceeds to marketing research, where the demand at various price points in several distribution channels usually is explored. Marketing research will identify a target price that the cross-functional product manager or the general managers will know is required on average over the product life cycle in order for the new product to provide sufficient revenue to cover fully allocated cost. Once a product or service rollout takes place (usually at target price levels), the marketing plan often authorizes promotional discounts. In this stage of the life cycle, the firm is interested in penetrating the market. To do so requires coupons, free samples, name recognition advertising, and slot-in allowances on retail shelves. Penetration pricing therefore characterizes this early stage of the product life cycle at which net prices to the manufacturer fall below the firm's target price, as shown in Figure 14.7. Figure 14.7. The Price Life Cycle Price, Cost Variable cost Target price Penetration price Value-based price Limit price Niche price Product life (months) According to the authors, pricing strategy frequently varies throughout the product or service's life cycle. Consider Netflix, Amazon Prime, Disney, and Apple. Which pricing strategy is each of the firms using for the Video Industry? Make a case for each company in three (3) or four (4) sentences. In the early stages of life cycle pricing, the marketing, operations, and financial managers decide what the customer will value, how the firm can manage the supply chain to consistently deliver those characteristics, and how much it will cost, including the financing costs. If the value-based prices can cover this long-run full cost, the product becomes a prototype. Each proposed product or service then proceeds to marketing research, where the demand at various price points in several distribution channels usually is explored. Marketing research will identify a target price that the cross-functional product manager or the general managers will know is required on average over the product life cycle in order for the new product to provide sufficient revenue to cover fully allocated cost. Once a product or service rollout takes place (usually at target price levels), the marketing plan often authorizes promotional discounts. In this stage of the life cycle, the firm is interested in penetrating the market. To do so requires coupons, free samples, name recognition advertising, and slot-in allowances on retail shelves. Penetration pricing therefore characterizes this early stage of the product life cycle at which net prices to the manufacturer fall below the firm's target price, as shown in Figure 14.7. Figure 14.7. The Price Life Cycle Price, Cost Variable cost Target price Penetration price Value-based price Limit price Niche price Product life (months) According to the authors, pricing strategy frequently varies throughout the product or service's life cycle. Consider Netflix, Amazon Prime, Disney, and Apple. Which pricing strategy is each of the firms using for the Video Industry? Make a case for each company in three (3) or four (4) sentences.
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Related Book For
Operations Management Processes And Supply Chains
ISBN: 9781292409863
13th Global Edition
Authors: Lee Krajewski, Naresh Malhotra, Larry Ritzman
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