Pricing Strategies

Question: Compare the differences between these two new product pricing strategies. With reference to the new product, Hologram watch, discuss and justify your recommended pricing strategy for this new product in light of the Roy Morgan Values Segment you are targeting. Answer: Two major pricing strategies for Hologram watches: Penetration Pricing: This kind of pricing strategy is adopted by companies when an innovative product is launched in the market. The main aim of this kind of pricing strategy is to attain a considerable and secured market share by launching the product at low-prices in the market. In case of hologram watches the manufactures can use this strategy for luring the customers form the existing competitors. This strategy will also help in discouraging the entry of new competitors into the market. Initially if the prices of the hologram watches are kept low then that will help in assembling the consumers towards the product (Zerdick, Schrape, Artope, Goldhammer, 2013). The entry of all those competitors who cannot offer the watches to the customers at such a small profit margin will become difficult. They will find it difficult to produce and promote the watches and therefore will avoid their entry into the market. This strategy will help the manufacturing company in maximizing their goodwi ll and brand recognition. Price Skimming Strategy: This strategy will focus on profit maximization for the companies. The companies by charging higher prices from early adopters of the hologram watches can easily maximize their profits. After attaining a certain level of profit margin they gradually reduce the prices with an aim of attracting maximum consumers. In case of Hologram watches the companies can launch their product initially with high prices. This will help the companies in capitalizing on the willingness of consumers who are ready to pay premium prices for availing the products of cutting-edge technology (Shavandi, and Zare, 2013). At times when the sales in the premium pricing group reduces or the competition starts then the company gradually lowers the prices of the product. This strategy works on the principle of skimming each layer of the target market till the reduced prices captures the market of the economical buyers. The best pricing strategy for hologram watches: According to the above discussion it can be easily observed that Hologram watches being innovative product can be launched in the market under price skimming strategy though the marketing costs are high under such strategies. The company for launching its product at skimming prices must adopt aggressive and extensive marketing for the product. This kind of marketing will help in explaining the customers with the unique features of the watches so that the high prices can be justified for the product (Bieber, Haescher, and Vahl, 2013). Through this strategy the focus of hologram watches companies will be on the creation of the premium segment of customers. These premium category customers are also quality conscious and therefore are ready to pay higher prices for hologram watches. The companies launching hologram watches provide little attention towards the cost aspect of product. References: Bieber, G., Haescher, M. and Vahl, M., 2013, May. Sensor requirements for activity recognition on smart watches. InProceedings of the 6th International Conference on PErvasive Technologies Related to Assistive Environments(p. 67). ACM. Shavandi, H. and Zare, A.G., 2013. Analyzing the price skimming strategy for new product pricing.Scientia Iranica. Transaction E, Industrial Engineering,20(6), p.2099. Zerdick, A., Schrape, K., Artope, A., Goldhammer, K., Lange, U., Vierkant, E., Lopez-Escobar, E. and Silverstone, R., 2013.E-conomics: Strategies for the Digital Marketplace. Springer Science Business Media.