Pricing Research Paper Example | Topics and Well Written Essays - 750 words

Pricing - Research Paper Example Ideally, skimming refers to setting high prices based on the value of the product (Holden and Burton 51). The features of the new washing machine are likely to excite the customers, creating no need for the company to opt for a discounted pricing strategy. The financial value of the product is strength to the organization. The new washing machines is built on new technology that requires very little water and energy to clean clothes. Therefore, customers are unlikely to put cost into consideration and instead consider the functionality of the washing machine. According to Holden and Burton (51), most customers buy a product due to the service they receive from the product, and not on price. In fact, very few customers choose to buy a product due to pricing, leaving the biggest customer base on the service side. Low pricing could make the customers perceive the washing machine as inferior. A low price intended to attract more sales might lead to decrease in sales in the later days, as customers’ debate on the standards of the product. Cheap products are considered to be of substandard quality while highly priced products are considered to be of high quality. ... A machine using little water and energy to clean is likely to be exactly what the market needs presently. An evaluation of various cost benefits the machine is likely to bring to homesteads is enticing enough for a person to be lured to purchase the machine. Imagine a machine that uses much less energy and even much less water to do the same amount of washing just like an ordinary washing machine? Is that not exciting good news? Out of all possible considerations, my price would not be based on either competition or willingness to buy by the customers. Penetration strategy is the war of prices where companies slash their prices with huge margins as they compete to retain their market share amidst overwhelming competition. Penetration strategy mostly applies to the period of growth where customers have understood the product while competition is still high (Holden and Burton 52). The product at this period still enjoys customer loyalty due to tested and experience with use. However, i n other cycles of a product such as maturity stage, penetration strategy is likely to fail and thus prevent the company from realizing all the intended profits. Understanding the type of market the company is operating in is important in setting the right prices. For an emerging market, the product is still new and customers are still willing to use the product. The company is rolling out this product to an emerging market, where customers are most likely to buy the product regardless of the price. When making my decision regarding the price for the machine, information such as customers’ trust to Whirlpool’s products will be helpful. Trust means that people already know