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Set Pricing for Customer Loyalty & Long-Term Profitability

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Jacob
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Re: Price Setting
Jacob   1/1/2014 12:17:04 AM
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"Yea that's another reason behind this strategy. Particularly in the case of technological products, companies generally have a patent on the product for a short while such as 5 to 10 years before anyone else is allowed to develop a similar product. This is why they want to capitalize on the time and make as much money as they can before it becomes a common product."

Taimoor, I think patent is valid for 20 years and thereafter anybody can use it.

TaimoorZ
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Re: Price Setting
TaimoorZ   12/31/2013 3:53:54 AM
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"..apart from that the very basic intention is gain as much as possible before competition get tight. That's a forceful situation from vendors."

Jacob: Yea that's another reason behind this strategy. Particularly in the case of technological products, companies generally have a patent on the product for a short while such as 5 to 10 years before anyone else is allowed to develop a similar product. This is why they want to capitalize on the time and make as much money as they can before it becomes a common product.

Jacob
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Re: Re : Set Pricing for Customer Loyalty & Long-Term Profitability
Jacob   12/30/2013 10:41:31 PM
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"Every company takes time out to make prices competitive where there are many industries churning out the same things. However, in the electronic supply chain, the company has to ensure decent after sales service"

Tirlapur, these three categories comes when a new product is introducing by a new vendor to the existing market segment. I mean to a competitive market. But when a new product with a new market segment, I mean first product of that category (eg- 3D/4D/5D printers), they can fix the price without considering any factors. There is no competition and later when competition starts, they can reduce the price.

Jacob
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Re: Price Setting
Jacob   12/30/2013 10:33:34 PM
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"That strategy is known as market-skimming prices where you set a high price to only skim the consumers from the market who can pay the high price. Generally these are the enthuisiasts or ardent fans who don't mind paying a premium price just to be the first ones to try the product."

Taimoor, apart from that the very basic intention is gain as much as possible before competition get tight. That's a forceful situation from vendors.

Jacob
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Re: Price Setting
Jacob   12/29/2013 11:39:14 PM
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"Right, pricing is governed by the law of demand and offer. When they are many businesses selling the same products, competition will drive the price low."

Law of demand is an old concept and now companies are creating artificial demands for a price hike. For example in automobile industry they will go only for 60% of booking for production and hence a 3-6 months waiting period of realizing the order.

HaileyMcK
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Re: pricing is difficult
HaileyMcK   12/27/2013 1:53:59 AM
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@t.alex, i agree that manycustoemrs go for lowest possible price. At the same time, many understandt he high cost of low quality, counterfeits, etc. There is a high value to having a relationship with the supplier and to understanding what a fair price is and what a ridiculously low price is.

t.alex
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Re: pricing is difficult
t.alex   12/26/2013 11:01:43 AM
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TaimoorZ, you are right. Creating strong differentiating products will definitely make customer pay premium.

TaimoorZ
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Re: pricing is difficult
TaimoorZ   12/26/2013 7:19:26 AM
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"Most of the time, any customer will just press for the lowest price possible."

@t.alex: I don't think this applies to all kinds of products. In cases where the products are pretty similar to each other and there is no differentiation in terms of the features or the brands, the customers will go for the lowest price. But, practically, the companies try to make their products stand out so the customers no longer for the lowest priced one but makes a rational choice by looking at the characteristics too.

 

TaimoorZ
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Re: Price Setting
TaimoorZ   12/26/2013 7:10:23 AM
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"But the current trend is collecting maximum profit at initial stage, by fixing the price at higher level and later giving further discounts, when competition becomes tighter."

@Jacob: That strategy is known as market-skimming prices where you set a high price to only skim the consumers from the market who can pay the high price. Generally these are the enthuisiasts or ardent fans who don't mind paying a premium price just to be the first ones to try the product. Once you penetrate through them, you lower the price to hit the masses. I think this strategy has worked for most technology companies including Apple.

TaimoorZ
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Re: Re : Set Pricing for Customer Loyalty & Long-Term Profitability
TaimoorZ   12/26/2013 7:05:01 AM
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"Too low, and consumer would think the product uses cheap and easily worn out parts, and wouldn't go for the product. Too high, and consumer wouldn't even look at the product, unless it is coming from a reputed company"

@tirlapur: I agree. Price certainly has a role to play in telling the customers whether the product is meant for them or not. It serves to segment the consumers into those who can afford and should buy it and those that shouldn't or cannot.

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