Pricing Strategies For Each Stage of The Product Life Cycle

The Product Life Cycle Pricing Strategies

What could be the possible pricing strategies for each stage of the product life cycle?

The product life cycle is the marketing strategy that has all the ups and downs of the product’s life from the product’s birth to death. Based on the stages of the product lifecycle the product’s prices are also to be set.

As the product’s life starts it has to go through unexpected ups and downs. As such a firm or marketer needs to carefully analyze the life cycle of the product and based on findings he has to design the pricing strategies.

The product life cycle has five stages introduction, growth, maturity, saturation, and declining. The marketer can apply the following pricing strategies for each stage of the product life cycle.

Pricing Strategy In the Introduction Stage

Shortly, the beginning stage of the product life cycle is the introduction stage. The introduction stage means the intro of a new product in the market for the very first time. In this stage, there is a small market for the newly introduced product, generally, no competitors, calls high marketing efforts, and very low sales, even sometimes no sales.

The primary goal of the introduction stage is to inform potential parties about the new product and attract them as fast as possible. Generally, in this stage product price is high.

Moving to price strategy, the pricing strategy in the introduction stage is also called new product pricing or new market pricing. This is the strategy any marketer adopts for the first time entering the market. At this stage, the product might be innovative, modified, or imitated.

Generally, the pricing of the product depends upon the nature of the product. However, the popular pricing strategies for the introduction stage are mentioned here:

Price Skimming (Market Skimming)

Price skimming pricing strategy assumes consumers will pay a high price for the new product and sets a high price on the new product while entering the market. And, as time passes and competition increases in the market the initial high price is lower to meet the competition.

The price skimming strategy is most suitable in the following situations:

  • If the firm is going to launch a new product for the market,
  • If the new product has a distinct feature strongly desired by the customers,
  • If the demand for the product is fairly inelastic,
  • If the new product is protected by patent rights or other rights, or the market is more protective of the product.

Price Penetration (Market Penetration)

In the price penetration pricing strategy, in the initial period of entering in market, the new product’s price is set too low, to penetrate the mass market immediately and thus obtain a large sales volume and larger market share.

The primary purpose of the price penetration strategy is to establish a market for the product, once the product market is established, the price of the product will be progressively increased. Maybe this strategy is suitable for the following situations,

  • When a mass (large) market exists for the product,
  • When the demand for the product is highly elastic,
  • When economies of scale are possible i.e. substantial reduction per unit cost can be achieved through the larger-scale operation.
  • When fierce competition already exists in the market for the product.

Read More: 8 Pricing Strategies That Maximize Sales and Profits

Competitive Pricing

As its name suggests, a competitive pricing strategy one can use when there is competition in the market. Here the marketer sets his product’s price that is close to the price of competitors with aiming to steal some customers of competitors.

Pricing Strategy In the Growth Stage

In the growth stage, product sales quickly increase and reach the top. The market becomes wider and more opportunities have been generated. As such were more opportunities, and other marketers or businesses were attracted to the market.

The competition is going on increasing rapidly. As competition is increasing the market has diverse choices of product prices. One customer can easily shift from one product to another if one product’s price does not play well to meet his expectations.

Since the competition is increasing, pricing strategies for the growth stage of the product life cycle, the marketer needs to offer product line pricing or options of product prices. And, in this stage, the product’s price needs to be set lower than set in the introduction stage.

Read More: What is Price Lining?

Pricing Strategy In the Maturity Stage

In the maturity stage, the profits and sales increase at a decreasing rate. There is intense competition in the market since the product has entered the maturity stage. Intense competition is the reason for the decline in the sales volume of the product.

Since the competition is intense, competitors have come up with varieties of products and prices. Now, the customers have more choices of the products and various ranges of prices than it was in the growth stage. They now more easily shift from one to another product.

In the growth stage, the marketer should have a goal to achieve a competitive advantage. Now only price reduction is not enough to capture customers’ attention the marketer needs also to provide non-price benefits.

The price reduction should be the first task of the marketer and he must offer a quality product, add different features, provide discounts, warranties, and after-sales service to meet customers’ expectations, and so on.

Pricing Strategy In the Saturation Stage

The saturation stage indicates, that in the market, there is almost no scope for growth. Now the competition is not only intense rather competition is cutthroat.

Read More: Factors Affecting Product/Service Pricing

The product’s sales and profits go on decreasing. If the product is not improved or differentiated or the market is not differentiated there is no chance to increase sales.

Thus, at this stage, one thing the marketer must reduce his product’s price and must work for customers’ peak satisfaction. Along with this must try to improve the existing product through advanced technology, make the unique product from competitors, choose market segments critically, and always remember without customers there are no sales so give priority to customers while setting the product’s price.

Pricing Strategy In the Declining Stage

The declining stage of the product life cycle means a total (relatively) decline in sales and profit. There are almost no opportunities in the market as such most of the competitors or marketers leave the market and go for searching new possibilities.

Here, almost there are no sales only the hardcore, loyal, and laggard customers buy products. Pricing strategies for the declining stage of the product life cycle would be reduced price and again trying to acquire the attention of the customers and focusing on building a prosperous market.

Though there seems no hope, since a large number of marketers left the market, the remaining few marketers can again recapture the market and start gaining profits as it was begun with the introduction stage.

Read More: 10 Importance of Pricing To The Firm, Customer, and Economy

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