Pricing Strategies

catch this end of the market. By doing this Microsoft can maximise their profits and cover the costs of developing the X Box. When sales start to slow down Microsoft should lower the price and use a different pricing strategy. To ensure sales keep increasing half way though the growth stage Microsoft should change the pricing strategy from skimming to market orientated. This is where the price charged is based on analysis of the market and its characteristics. Market research might need to be undertaken again at this point to ensure that Microsoft knows what the customers are willing to pay. Market orientated pricing should be used at this point because the top end of the market is likely to be saturated, Microsoft will need to lower the price of the X Box slightly to provide for the people that aren’t willing to pay as much. Using market orientated pricing will therefore help keep sales rising and the X Box will appeal to a broader market. When the sales of the X Box are slowing down it could be because of competition. This is when Microsoft will need to use competition based pricing because new games consoles will be being launched and the X Box wont be new technology anymore. Microsoft will need to lower the price a lot to compete with the new technology and keep people interested. Psychological pricing could be used throughout the life cycle. This is when a product is priced at 99p instead of a pound so that the customers automatically think it’s cheaper. I don’t think Microsoft will need to use cost based pricing with the X Box because Microsoft makes so much money off existing products going into debt wont be a problem. The X Box will soon make up for the research and developing costs in the growth stage of the life cycle. Penetration pricing also isn’t appropriate for the X Box because new technology doesn’t rise in price as it becomes more popular it starts off at a high price because of the cost of development. Price to be Set In the introduction stage of the life cycle the X Box should be priced at 299, in the growth stage the price should be lowered to about 249, when the market has been saturated the price should be lowered again to 199 and when the product goes into decline it should be priced between 99 and 149. Factors Affecting the Price Cost of promotions and advertisingCost of research and developmentCustomer’s needs and wantsCompetitorsDemandCosts of distribution