PRI - Product Life Cycle [LESSON]

Product Life Cycle

Firms use different pricing strategies for their offerings. And oftentimes, the strategy depends on the stage of life cycle the offerings are in currently. Products may be in different stages of their life cycle in various international markets. Next, we'll examine three strategies businesses often consider when a product is first introduced and then look at several different pricing approaches that companies utilize during the product life cycle.

Introductory Pricing Strategies

Think of products that have been introduced in the last decade and how products were priced when they first entered the market. Remember when the iPhone was first introduced, its price was almost $700.

Since then, the price has dropped considerably even for new models. The same is true for DVD players, LCD televisions, digital cameras, and many high-tech products. A skimming price strategy is when a company sets a high initial price for a product. The idea is to go after consumers who are willing to pay a high price (top of the market) and buy products early. This way, a company recoups its investment in the product faster.

Click below for audio on an easy way to remember the skimming price strategy.

In contrast to a skimming approach, a penetration pricing strategy is one in which a low initial price is set. Often, many competitive products are already in the market. The goal is to get as much of the market as possible to try the product. Penetration pricing is used on many new food products, health and beauty supplies, and paper products sold in grocery stores and mass merchandise stores such as Walmart, Target, and Kmart.

Click on each phase of the product life cycle for more information.

Pricing Strategies Vocabulary Review

Career Highlight

Program of Study - Advertising

Programs in advertising teach people how to create messages to promote and sell products, services, and brands. Advertisers create commercials using print, TV, radio, social media and the Internet.

If you decide to study advertising some courses you might take are 

• Copywriting
• Buyer behavior
• Campaign management
• Graphics and software
• Law of mass communications
• Market research
• Principles of design
• Psychology

You don't have to wait until you get a job in advertising to start a portfolio. Start now collecting materials you create like press releases, newspaper ads, flyers, posters or other design and information type projects.

Review

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