Pricing decisions are most complex at which stage of the product life cycle?
Introduction
The question asks at which phase of the product life cycle a firm faces the greatest difficulty in setting price. This item was dropped by UGC with marks given to all candidates, but the most defensible answer, consistent with the official key, is the introduction stage.
At the introduction stage the product is new to the market, so there is no established price, no proven demand curve and little competitive reference to guide the decision. The firm must decide between two very different launch strategies - price skimming, which sets a high initial price to recover development costs from early buyers, and penetration pricing, which sets a low price to build volume and market share quickly - and it must do so amid maximum uncertainty about customer response, costs at scale and competitor reaction. This combination makes pricing most complex here.
By the growth and maturity stages a market price has emerged and competitors' behaviour is observable, so pricing becomes a matter of adjustment rather than first determination. In the decline stage the choices narrow to holding, harvesting or dropping the product. None of these carries the open-ended uncertainty of the launch.
Hence pricing decisions are most complex at the introduction stage.
Similar Questions
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy ?
The practice of selling below cost, with an intention to destroying the competitor is referred to as :
Select the correct sequence of steps in setting a pricing policy:
(a) Determining Demand
(b) Analysing competitors' costs, prices and offers
(c) Selecting the Final Price
(d) Selecting the Pricing Objective
(e) Estimating costs
(f) Selecting a pricing method
Codes:
The price setting method most closely corresponding to the concept of product positioning is:
A company prices a 2 litre bottle of its mineral water at ₹ 30 but 60 ml of the same water in a moisturizer spray for ₹ 75. This is an example of which one of the following pricing practices?
When the Companies pay less attention to its own costs or demands and bases its price largely on competitors’ prices, then it is known as :
The practice of selling below cost, with an intention to destroying the competitor is referred to as:
After determining its pricing objectives, what is the next logical step a company should take in setting its pricing policy?
Find the most appropriate sequence of life-cycle of price for a product, from the initial stage to the mature stage.
Important Questions from Pricing decisions
Pricing practice of setting a price target and then developing a product that would allow the firm to maximise total profit at that price is called:
Which of the following is the characteristic of price?
In which of the following price adjustment strategies. a company reduces prices to reward customer responses such as volume purchases, paying early or promoting the product?
The consumer's price sensitivity is / are influenced by
A. Who bears the cost
B. What percentage of total expenditure does the product represent
C. Who bears the cost and type of retailer from where customer purchases
D. Consumption of product by the customer
E. Knowledge about the product
Choose the most appropriate answer from the options given below:
- Which of the following are the informal pricing methods ?
I. Cost plus
II. Competitive
III. Rate of return
IV. Trial and error
Codes :
