Kamikazi Pricing
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LBM201 Marketing Planning
SEMESTER 1, 2004
Written Tutorial Presentation
"Kamikaze Pricing"
Reed.KH and Nagle.TT
Due 7.00pm Thursday April 15th 2004
Project by: Mark Caton 4095243
Word count: 1485
Tutor: Julie Badger
Executive Summary
This report aims to critically analyse and discuss the main issues contained in the article 'Kamikaze Pricing' by Reed and Holden.
The analysis conducted includes how and why companies use penetration pricing to grab a quick market share to push their product onto the customer as well as another option, value pricing.
Findings include that penetration pricing can be dangerous and has the potential to ruin the company's image and to also dry up profits for competitors within that industry. There are, however, many situations where a penetration pricing strategy is warranted, including situations where a product is in its initial stages in the product life cycle and when a company sees a profitable market gap.
When implementing this strategy the company must consider the long-term implications. Preferably enter a market that is in the introductory stage of its product life cycle, assess internal and external capabilities to use the strategy, be prepared to adapt cost structure especially when competitors react and lower product prices. To avoid possible long-term issues a company should use value based pricing and attract consumers by using non-price lures such as a high quality product, efficient after sales service and/or strongly promote these initiatives to make sure the market are very aware of the benefits...