Question

What are the two pricing strategies that a business can select for pricing new products? Give...

What are the two pricing strategies that a business can select for pricing new products? Give an advantage and a disadvantage of each

Homework Answers

Answer #1

Premium pricing:

Premium pricing strategy is used when a new product is launched mainly in the luxury segment and have a distinct competitive advantage over the competitors’ products. A premium-priced product is priced higher than its competitors. It is most effective in the beginning of a product's life cycle

Advantage: Company can be able to earn on high return on investment.

Disadvantage: Too much higher price set bad impression of the manufacturer.

Price skimming is a pricing strategy where very high price is set in order to sweep the market and earn high on the investment and gradually lowering the price in the market.

Advantage: More revenue earn from the early purchases

Disadvantage: Difficult to lower the price as it will hamper the brand image

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