In order to market the newly developed product by the Kapsean Company, the company should consider a pricing strategy that is reliable and cost effective. The best strategy that Kapsean Company can use to market his product is the penetrating pricing strategy. This is pricing method whereby the initial price of the product is set such that it is relatively low compared to the ultimate market price (Cousins, 1999). The main aim of setting this low price is solely to attract customers who are new to the product. Customers are expected to start using the new price because of its low cost. Penetrating pricing strategy is therefore, solely meant for increasing the market share rather than profit making in a short time span.
Penetrating pricing is the best method for Kapsean Company because it leads into adoption and fast diffusion. Due to this, the company will achieve high market penetrating rates. Its competitors will therefore have no time to react to its entrance into the market. Other than this, this company will be able to build more trade by word of mouth. This is achieved because this strategy can develop benevolence among first adopters sector (Belch, 2003).
Kapsean company will experience higher efficiency due to cost reduction and cost control pressures created from the start. In addition, competitors will not be able to easily enter into the market because low prices generally act as entry barriers. Since Kapsean Company will have its products offered at low cost, other companies, will not be willing to offer at the same price and are hence, discouraged from entering into the market. This therefore, gives Kapsean Company a chance to gain a larger market for its product. bigger stock turnover can be created throughout the channel of distribution and hence support and enthusiasm in the chosen distribution channel. Lastly, to achieve economic efficiency this method is appropriate because its basis is majorly on marginal cost pricing.
This pricing strategy will be impacted by the demand of the product. It is only appropriate if the demand is price flexible and where the demand is high. Apart from this, this method will only be favorable during the introduction of the product into the market and it is likely to get stiff competition after it has been introduced to the market. In addition, this strategy requires that the company should be carrying out standardization. If the market penetration for the product is high, it becomes the standard of the industry (De Leon, 2007).
Belch, L. (2003). Advertising and promotion: an integrated marketing communications
perspective. McGraw-Hill Publishers
Cousins, L. (1999). Role of Marketing Plans in Marketing Planning?, Business Strategy Review
vol. 4, Issue 2, June 1991, Pages: 42-41
De Leon, J. (2007). Establishing a vision of shared governance through SWOT analysis.
Department Chair, vol. 9, Issue 1, 2007, Pages: 26-32