PRICING STRATEGY

Pricing Strategy

Pricing Strategy

As the product name meaning at this stage is new and just beginning to enter the market. For example, in 2004, introducing a new product, which is the X5, X6, X7 and the market. The company had spent a great deal of research and development costs for product development. In the introduction stage, the main objective of Orange is to create market awareness. Therefore, the cost of marketing and distribution of Orange is very large, the purpose of establishing the brand and product quality at this time. It is not likely to have profit in this stage is only one stage of the market test.

Year by Year Decisions: Pricing & R&D Allocations

PRODUCT

DECISION

2006

2007

2008

2009

X5

Price

$ 250 $ 250 $ 250 $ 250

R&D %

33%

33%

33%

33%

Discontinue?

NO

NO

NO

NO

X6

Price

$ 400 $ 400 $ 400 $ 400

R&D %

34%

34%

34%

34%

Discontinue?

NO

NO

NO

NO

X7

Price

$ 200 $ 200 $ 200 $ 200

R&D %

32%

32%

32%

32%

Discontinue?

NO

NO

NO

NO

Companies can choose as market skimming pricing strategy of the product in order to recover the huge development costs. Or they can choose market penetration in order to build market share. In the startup phase of the introduction of X5, X6, X7 and products, Orange wanted to recover the huge development costs and market skimming chosen. However, brushing market success depends on market demand inelastic. There are substitutes for many of the X5 and X6, X7 and the market, so make the most elastic market demand. Thus, Orange suffered huge losses in the market skimming.

The product at this stage increasing sales volume and profits. Company spend much on advertising and market share capture readiness which has been more stable than in the pervious stage. For example, in the early years, the demand for broadband connections is increasing and more people would like to have one after the introduction of PCCW, which is the leader in the broadband market at the time. Sales and profits of PCCW was great at that time. And PCCW have invested more in the market to get more market share. The cost was less than the introduction stage and the marginal cost is low due to increased production. In addition, PCCW had tried to create more distribution channels, such as the establishment of outlets in the street and building stores in malls, etc. The price of broadband connections was more stable at relatively higher low. One of the reasons for the low level of prices that has attracted more competitors enter ...