Pricing and the Product Life cycle

1. Pricing and the Product Life cycle Maturity Intro Growth Decline Introduction Companies Focus is on Promotion and Production. Product Awareness #1 concern. DOLLARS Sales Pricing Strategies: Skimming and Penetration Profit TIME

2. Introduction Skimming Setting a high price in the intro. Stage: large Profit Margin • Trendsetters – willing to pay the high price to own 1st • Disadvantages • High profits attract competition • Profit maximization is short term • Problematic if initial price is way to high Penetration Setting a low price in the into. Stage: Goal create demand • Most effective for products w/ elastic demand • Advantage • Large amount of product is sold to a wide range • of customers (demo, geo, and psychographic)

3. Pricing and the Product Life cycle Growth GROWTH Intro Maturity Decline • Characterized by: • Increasing • sales and Profits • Focus on consumer satisfaction • Competition increases • Modifications begin DOLLARS Sales Profit TIME

4. Growth - Sales increase quickly (marketers want to keep the product at this stage for a long time) ·Cost per item drops due to increased sales ·Price changes depend on how the price was set in the introductory stage ·If skimming pricing was used in the introductory stage, the price and sales should be closely monitored for a decline in sales; then price will fall · When penetration pricing is used, the price usually remains unchanged but promotion is used to continue the high sales

5. Pricing and the Product Life cycle Maturity Growth Decline Maturity Intro • Characterized By: • Sales level off • Profits drop • Competition heavy • Target market owns • Marketing dollars • used fighting off • competition • Do you continue to • Modify product DOLLARS Sales Profit TIME

6. Maturity Sales begin to fall ·Marketers search for other target markets by introducing new uses for products, trying to stretch the life of the product Marketers look for psychological Pricing methods to stimulate sales From the competitors For example, when a large portion of consumers have CD players. Marketers will use modify product to maintain price or have sales.

7. Pricing and the Product Life cycle Decline Growth Maturity Intro Decline • Characterized by: • Profits could be • Smaller than cost • Choices: • Drop product • Sell / license prdt • Regionalize prdt • Modernize prdt DOLLARS Sales Profit TIME

8.   Decline Sales decrease and profit margins decline Price Discounts evident for the product to compete in discount stores. Example: Lever brother discounted Pepsodent toothpaste and Lifeboy Soap and advertised the products with phases, such as “compare and save”. .

9. Pricing and the Product Life cycle Growth Intro Maturity Decline How does this Compare to the Family life cycle? DOLLARS Sales Profit TIME