Skimming Pricing Skimming Pricing Is the Strategy of Establishing a High Initial Price for a Product with a View to “Skimming the Cream Off the Market” at the Upper End of the Demand Curve. It Is Accompanied by Heavy
ICU: INTRODUCTION TO MARKETING
Vladimir V. Bulatov. bbe@voliacable.com
We, Fr 8:30
LECTURE 12. PRODUCT DEVELOPMENT II.
Reading: Ch. 11, 12, addendum sent onto your e-mails.
Three product levels in marketing:
1.Core product: “what the buyer is really buying?” (E.g. Charels Revson [Revlon] recognizes that: “In the factory we make cosmetics; in the store – we sell hope”). Product concept is the idea about benefits, not features.
2.Tangible product – a ready-to-use product that has certain level of quality, features, styling, brand name, and a package.
3.Augment product additionally possesses such benefits as installation, delivery, credit, warranty, after-sale servicing, etc.
Warranty – a statement about manufacturer’s liability for product deficiencies.
Guarantee – basically, a money-back promise.
Packaging – a container in which a product is offered for sale.
Exist 3 basic benefits of using packaging:
- communication (technical and legal info must be put on a package),
- functional (convenience, protection, storage), and
- perceptional (extremely important for final consumer goods because package makes the first [and sometimes the final] impression about a product).
Product Life Cycle: a concept, that describes the stages a new product goes through on a marketplace: development, introduction, growth, maturity, and decline.
.
4 Stages of Product Life Cycle
I.Introduction phase (Development Stage is Stage #0)
2 strategies are usually practiced:
a. skimming pricing – strategy to cover the costs of development quickly;
(3M: “We hit fast, price high, and get the heck out when “me-too” products pour in”)
b. penetration strategy – low prices to discourage competitive entry.
II.Growth Stage (Characterized by appearance of repeat purchases).
(If a product fails to achieve substantial repeat purchases – it usually fails completely). At this stage product proliferation occurs (appearance of a significant number of model variations).
Vladimir V. Bulatov. bbe@voliacable.com
We, Fr 8:30
LECTURE 12. PRODUCT DEVELOPMENT II.
Reading: Ch. 11, 12, addendum sent onto your e-mails.
Three product levels in marketing:
1.Core product: “what the buyer is really buying?” (E.g. Charels Revson [Revlon] recognizes that: “In the factory we make cosmetics; in the store – we sell hope”). Product concept is the idea about benefits, not features.
2.Tangible product – a ready-to-use product that has certain level of quality, features, styling, brand name, and a package.
3.Augment product additionally possesses such benefits as installation, delivery, credit, warranty, after-sale servicing, etc.
Warranty – a statement about manufacturer’s liability for product deficiencies.
Guarantee – basically, a money-back promise.
Packaging – a container in which a product is offered for sale.
Exist 3 basic benefits of using packaging:
- communication (technical and legal info must be put on a package),
- functional (convenience, protection, storage), and
- perceptional (extremely important for final consumer goods because package makes the first [and sometimes the final] impression about a product).
Product Life Cycle: a concept, that describes the stages a new product goes through on a marketplace: development, introduction, growth, maturity, and decline.
.
4 Stages of Product Life Cycle
I.Introduction phase (Development Stage is Stage #0)
2 strategies are usually practiced:
a. skimming pricing – strategy to cover the costs of development quickly;
(3M: “We hit fast, price high, and get the heck out when “me-too” products pour in”)
b. penetration strategy – low prices to discourage competitive entry.
II.Growth Stage (Characterized by appearance of repeat purchases).
(If a product fails to achieve substantial repeat purchases – it usually fails completely). At this stage product proliferation occurs (appearance of a significant number of model variations).