How To Determine Market Price?

06/09/2015 03:10

To determine the price of new products you can use the strategy of penetration and strategy collecting cream. If you are unsure of the meaning of terms, followed by some useful information.

Strategy penetration

Strategy in which the company determines the price of a product at a lower level than its actual value for the purpose of faster and more comprehensive market share gains. The strategy of penetration is justified when it is expected to soon join the competition on the market, even if the demand for the product price elasticity.

This primarily means that the target market is relatively sensitive to price changes. The negative side of this strategy are that lower prices may raise doubts about the quality of products by customers and reduced the enthusiasm of sellers due to lower margins.

The strategy of collecting cream

The strategy determines the prices at relatively high levels and are gradually lowered. Strategy cream collection is performed when you want as quickly as possible to cover the cost incurred in the development stage of a new product. This strategy is applicable in companies whose products demand is inelastic, and the company has a monopoly over the product.