Page 115 - Marketing the Basics 2nd

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a product to reduce the market price and force other competitors to exit bears severe financial and in extreme cases, even criminal penalties.
MARKET SKIMMING
Aggressively entering a market with a low price to realize economies of scale and build market share is not an appropriate strategy for products with high start-up costs and low demand, much like many high-technology products. Instead manufacturers price their product in such a way that they ‘skim’ those who are willing to pay the highest price first, and slowly reduce the price as the high payers market is exhausted. These high payers are often firms or people for whom the solution you offer is a ‘God send’, your product fills a need which is quite important to them and could not be met, or met easily, before. Such customers are what economists call price insensitive – they will pay a lot. Some pharmaceutical products are priced in this way. If the new drug will save your life or that of a loved one you tend to be less concerned about cost and more about just getting the product. Morality does not interfere with profit, it seems.
High prices for cutting-edge technology often create a buzz in the media and among the user community, and for those who can afford to purchase the item, a chance to earn social prestige. For the producer, the high price allows the firm to recoup its costs faster. Over time, the price is reduced and is marketed to the masses. Some textbooks call price skimming ‘riding down the demand curve’. Of course, all good things must come to an end and this phase only lasts so long. The main thing that happens is that competitors rear their ugly heads. In our economic system, profit is the ‘blood in the water’ to the sharks of capitalism; as soon as they see it they quickly are drawn to get their fair share.
PRODUCT-qUALITY LEADERSHIP
Firms that choose a product-quality strategy aim to become the innovator of the industry and offer products of the highest quality. Those that deliver on these two fronts can use those features as