Basic Pricing Strategies For A New Backpack Entering The Market

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The price strategy defines the initial, base price and the appropriate strategy depends on the pricing objectives. There are three basic pricing strategies for pricing a product or service: price skimming, penetration pricing and status quo pricing. Effective marketing involves the price being set to equal the perceived value of the product, a backpack, to the target market, university students. The following sections discuss the alternative pricing strategies, the advantages and disadvantages of these and the most appropriate strategy for a new backpack entering the market. Price skimming, also known as market-plus, involves setting a high price when compared to the competition and then eventually lowering this price. It is usually used for new products and services that will attract early-adopters willing to pay a higher price. The business can initially reach these early-adopters to maximise revenue, but this may be limited because students are often price-sensitive due to their low income. However, the higher price enables companies to test students’ willingness to pay a high price, and then lower the price to appeal to those who are more price-sensitive. Although, this may aggravate early adopters, a lasting high price may defer mass market acceptance. The initial high profit margin may lead companies into avoiding cutting production costs which is necessary for when the selling price lowers. However, price skimming allows the company to quickly recover product

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