PUTRAJAYA CAMPUS

SEMESTER 1 2019/2020

MARKETING MANAGEMENT INDIVIDUAL ASSIGNMENT

MARKETING MANAGEMENT

MKTM613

PREPARED BY: NUR SYAKIRIN SULAMIN (SB22937)

PREPARED FOR: ASSC. PROF. DR. RUSINAH BT SIRON

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 TABLE OF CONTENT

No. Content Page No.

1 Question 1 3-4
2 Question 2 5-7
3 Question 3 8-9
4 Question 4 10 - 13
5 Question 5 14 - 16
6 Question 6 17
7 References 18 - 20

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QUESTION 1
Explain how companies identify attractive market segments and choose
a target marketing strategy.

Segmentation is a marketing management technique that helps companies to

be in competitive advantage. In order to companies to identify market segments
there are several approaches that companies took off. As different consumers have
different needs, wants and preferences towards products and services, companies
should be able to distinguish the elements for them to cater all of their potential
consumers in the market. In here, companies should be able to conduct a market
research so that they can have valuable information that helps a lot to identify their
potential market segments. Specifically, these helps to makes sure the information
that the companies gathered are thorough to the slightest details.

The first approach that companies should look into is Geographic Approach.
Geographical method is related to the physical features of the consumers’ area. In
this approach subsets that taken into account are area of country which is the sum
of all land and inland water bodies (i.e.; lakes, reservoirs or rivers), population size
of the area which is the number of individuals in the population, predominant make-
up of the area which is the region, culture, set of races or religion that dominantly
resides in the country that contributes to others perception of the country and
climate. Geographically, different parts of the world have unique desires and
preferences which companies have to look through into before launching a new
product that fits right in that geographical area. For instance, the Coca-Cola brand
diversifies its product globally by infusing geographical area’s elements such as
using local languages in advertisements to make potential consumers to highly
understand regarding the products, sponsoring international major events such as
FIFA World Cup, Olympics and NASCAR to market aggressively, and makes sure
that the product are accessible in any stores whether it’s urban or rural area. Now,
we can see that Coca-Cola is now marketed itself for more than 155 nations
altogether.

Secondly, companies should look into the Demographic Approach.

Demographic segmentation can be broken into few different factors such as age,
gender, family size, income, occupation, education, religion, race and nationality.
This is important because companies be able to know the right people with the
right criteria to market the products. For instance, if a company would produce baby
formula milk, they should be sensitive about the suitable age of the babies to
consume the formula, which are approximately around 12 months old until the age
of 2 years old. If the company is not well into details, this might jeopardize the trust
of consumers towards the products’ integrity. Also, the company have to make sure
to market the formula milk product they need to tackle people with bigger family
size that currently having babies. It is not suitable for the company to market this
product to the singles and people that are not having child. In addition, if the
company marketed the product which serves in a Muslim country, they should be
considering to put in Halal Certifications that is proven from professional bodies on

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the packaging so this could build a chain of trust from consumers that the products
are certified and safe for the Muslims to consume.

Next, the companies should also focus in Psychographic approach. In this

approach the companies can break up the potential customers by their social class,
lifestyle and personality characteristics. As we know, the basic social class are
divided into 4 main groups which are Upper-Class, Middle-Class, Working-Class
and Lower-Class. Each of these classes represents different working backgrounds,
income groups and perception of social status. Companies that produces luxurious
goods should market the products for people that are in Working-Class up to the
Upper-Class group. This is because companies should specifically choose its
suitable customers in order to sustain the demand of the product. Lifestyle can also
a contributing factor for creating demands. For example, Starbucks Corporation is
now a commercialized coffee chain that embeds itself to the lifestyle of its
customers. They advertised themselves to have the best coffee for its customers
to start their day with and launches new menus which follows the mainstream
trends such as the Unicorn Frappe, Dark Caramel Boba Tea and Pokeball
Frappucino. This strategy resulted Starbucks Corporation coffeehouses are
perceived to be well known for higher social status group to go for business or
social networking among the millennials which associated with the term, “hipsters”.

Lastly, the Behavioural Approach is also crucial for companies to identify the
market segment for its product. This approach can be break into occasions,
benefits, user status, usage rate, loyalty status, readiness stage, and attitude
towards product. This approach can be used for seasonal products that produces
only around selected holidays such as Christmas, Eid or Chinese Lunar New Year
because companies could market their product and able to tap a large customers’
desire in different occasion. For example, McDonalds Malaysia produces the
Prosperity Burger only in the occasion of Chinese Lunar New Year and customers
would not want to miss any promotion of the product whenever Chinese Lunar New
Year approaches. With this approach also, companies be able to know what
benefits that the customers could found by purchasing their products and
companies could have segmented their products into different functionalities. For
instance, Omega, produces Swiss well known watches, offers substantial number
of watches collection for underwater diving watches, sport watches, and fancy
fashion watches. With different functionalities, Omega could reach a large number
of customers with different preferences. Information regarding heavy users of
certain products that might be influenced by habits, social norm or basic needs
could be seen in this approach by looking at customers’ rate of usage. For example,
the purchasing number of rice, cigarettes or mobile reload.

After companies have gone through each of the approaches that had been
mentioned, companies can break down a market to a well-defined smaller
groupings of consumers with same needs and desires. This enable companies to
meet the needs and desires by producing the right products and services. With the
right information and details companies can identify specific appeal to attracts
directly to the target market.
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QUESTION 2
Discuss how companies can position their products for maximum
competitive advantage in the marketplace.

Product positioning is an important action that management should focus on

especially in new product development. The reason behind this is when the company
able to make sure the products’ position in the right market, the products would occupy
clear, distinctive and desirable place in the minds of the customers. New products be
able to reach sustainable demands in the long run. Positioning consists of 3 concepts
that can be discussed on which are functional, symbolic and experiential. Functional
concept is relevant to products that serve functions towards the customers. It is usually
solving consumption’s related problems rather than creating consumption needs. For
instance, toothpastes which aims to prevent cavities and banks which offerings various
of services for customers’ financial services experience. In symbolic concept, it closely
related to buyers’ inner needs for self enhancement, role position, group membership
or ego satisfaction. We can take cosmetics and clothes as appropriate example.
Usually customers would purchase these products to look good, to be appropriate and
to gain their self –esteem. The last concept, experiential concept is relevant to be used
for products that provide sensory pleasure, variety reactions and cognitive stimuli. This
could be illustrated with products such as documentary films and books.

In determining product positioning, companies should take the right steps so

they could position the products in the right market. We could break down the steps
into 7 important steps that should be done by companies to determine suitable product
positioning, which are stated as below:

1. Define the segments in a particular market.

In this step, the company have to conduct a thorough research in order to

identify the suitable segmentation for the product. This where the company
should take the Market Segmentation Approaches which are, the Geographic
Approach, Demographic approach, Psychographic Approach and Behaviour
approach to use. This also resulting companies to learn each selected potential
targeted market.

2. Decide which segments to target.

After gaining all information regarding the potential market, in this step
companies would perform decision making in choosing to position the products.
In deciding the segments to target, companies should consider the cost and the
impact of the products towards the market. Higher costs equivalent to higher
risks. Companies should be cautious and be alert for any red flags that might
occur during decision making. Wrong decision could lead to failures.

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3. Specify customers’ key purchasing considerations.

In this step, the companies should identify the underlying factors upon which
products or brand will be based. Here, companies should understand the
customers’ expectations, beliefs and criteria when deciding a purchase. This is
where companies should be able to portray that the products they introduced
meet all those 3 factors in buying. If they do it well, this would be resulting a
positive impact of trust from the customers towards the products.

4. Develop brand to meet key purchasing considerations.

In this step, the company should already have developed the product that
caters especially to the customers’ expectation. It is important for companies to
carefully design the brand, logo, packaging and contain of the products so it
would meet the customers’ expectation. The company can use brand narrative
or storytelling approach to communicate the brand into the chosen market
segmentation. With that, customers could understand and appreciate the
products.

5. Evaluate positioning images of competing products in targeted segments

In this step, companies could take any competitors to evaluate the positioning
and images as perceived as target markets. The competitors’ strategies could
be a benchmark to the companies so they could improve the products
excellence to reach as good of quality like the competitors offered. In
understanding the competing brands, the company able to differentiate their
brand with their competitors’ brand. This could also enable companies
developing a good reputation towards products to distinguish the brand from
other competing brands.

6. Select image to set brand apart from competing products.

In here, companies would decide the selected image to present itself to the
customers. Companies should consider the uniqueness of the brand,
aspirations that could be impacted to customers and strong presence that the
brand name would carry in choosing the suitable brand. The brand should be
credible and able to tackle customers’ attention from just a glimpse of glance.

7. Communicate image to target customers with appropriate marketing mix.

In this last step, the marketer should work out a strategy in making sure the
targeted customers are fully aware regarding the product. The marketer can
use advertising, promotional strategy or personal direct selling method to
ensure the products are accessible and able to reach the customers for them
to purchase. Marketers also should incorporate the marketing mix to the
strategy so it would elevate the value of the products.

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 These steps can be a guideline for companies for them to position their product.
The decision makers should work together with the marketing department to
brainstorm regarding the potential market segments to market the product. When
introducing the product, the company should open for any criticism. This for the
company could have spaces for them to improve and sustain in the market. There
would be also a probability for the company to fail at several attempts of positioning
so the company could try more combinations of approaches and tools to mitigate the
problem. It is also important for the product to adapt to the market so the product could
be appreciated locally.

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 QUESTION 3
Discuss branding strategy – the decisions companies make in building
and managing their brands.

In order for companies to make sure their products would have sustainable
demands, companies emphasize their focus in brand’s building, developing and
nurturing activities. It is important for companies to gain competitive advantage and try
to monopolize the market by communicating a strong image brand presence. This also
can contribute the product to reach brand equity. That is why there are strategies that
companies could be implemented such as trademark, line extension, brand extension,
franchise extension, and dual branding.

Trademark is a face of the brand or company. It is usually used to distinguish

the product from the competitors and it does contributing to the product prominence in
the market. In this strategy, the brand name should evoke feelings or reactions that
relevant to the consumers’ when they are purchasing the products. The trademark is
appreciated as an intellectual property, which can be patented. With this, the
companies could protect the legitimacy of the brand name and retain the perceived
strong presence in the market. This could be illustrated by the well-known sportswear
brand, Adidas. The company uses the three parallel lines on its shoes, clothing and
accessories which resulted them to be called as “The brand with the three stripes” for
almost 60 years. There are products that the brand produces are quite expensive and
fancy, customers would buy the product without hesitation because of the brand’s
strong presence.

Line extension is the use of established product name and creating a new
product related to the same category of the product’s name. This strategy often used
when the company would like to diversifies its products to tap into new niche market
segmentation. As a consequence of the product’s name had achieved high awareness
from the customers, the company would gain more profit if the company able to make
new offerings but without changing the nature of the product that had been produced
before. For example, The Coca-Cola Company, produces the non-alcoholic beverage
Coca-Cola and had already sustain themselves in the market for more than 100 years.
Every part of countries in the world knows the brand and it carries such strong
presence anywhere. With that, the company stays relevant in the market by producing
different flavours of Coca-Cola beverages such as Diet Coke, Vanilla Coke and the
brand new Stevia flavoured Coke. With this diversification, The Coca-Cola Company
serves more market segmentation that they could make profit to.

Brand extension is almost similar to line extension but the difference is the use
of product’s name is for new products that would be marketed into new product class.
In here, the company would go out from the nature of the product to tap into new niche
market segmentation. It is a risky differentiation that company would take for because
they would need a new expertise to produce the products and customers would turn
down the creativity of the company. If the company able to do it right, it could appeal

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the customers that the brand could evolve their products and service from time to time
to stay relevant and competitive. We can take Ralph Lauren, the luxurious apparel
brand as an example. The brand had stretched itself to a very wide market
segmentation by extending to brands such as Polo Ralph Lauren, Ralph Lauren Purple
Label and Ralph Lauren Rugby. The apparel that represented on each brands are
different and focuses to diversifies customers’ preferences. The brand also manages
to attract the Working Class, Middle Class and Upper Class social groups because the
brand produces affordable apparel to high end apparel that caters respective
segmentation.

Franchise extension is a branding strategy that used by companies to attach

the company’s corporate name to its products to enter the new market segment or to
a different product class. This strategy is mostly focusing towards the range of
customers and making sure to make the products following to the specific group of
customers only. For instance, the automobile brand, Lexus. As we know, Lexus is a
brand that produces luxury car and it is a division brand of Toyota. Historically, Lexus
division was born in 1989 in order to mitigate against Americans’ perception regarding
Japanese products. The Japanese and Americans have encountered series of
countries controvertion and that is why it is hard for Japanese car to tap into the
American’s market. After establishing Lexus, Toyota receives a positive impact from
the market and able to adapt in American’s market.

Dual branding, or known as Co- Branding, is a strategy that involves multiple

brands that are joint into one brand name. This strategy often includes strategic
alliances between brands’ corporate members. Companies that uses this marketing
strategy is creating a marketing synergy between companies in the same industry or
outside the industry in order to market new products in a new market segmentation.
This alliance that was made should be constructed carefully so it would not jeopardize
the business process of those separate companies. Most of dual branding failures are
caused by the alliance that contributes bigger problem to management and operation
level. In order for the brands to make a smooth transition, they should have a phases
of changes so employees from all levels could adapt with the situation. One of the
successful dual branding example is Nike and Apple. Both of this brands initiated a
collaboration that contributes to Nike+ application and a microchip invention that fits
only for Nike+ running shoes. The product is booming and created a substantial
demand of running and entertainment. Both of these companies know to tap the
market of athletics consumers that needed entertainment in dong their workout. Hence,
the partnership profiting to both of the companies.

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QUESTION 4
How does an industrial product differ from a consumer product?
List and summarize the characteristics of the three major groups of
industrial products.
In the table below shows the differences of an industrial product and a
consumer product:
Industrial Product
These are the goods that bought for the
purpose of industrialization and business
use. For example, machineries, plants,
and raw materials.
The products are marketed to limited
number of buyers. As an example,
automotive machineries. This machine
cannot be marketed to the large market
because the product only serve a little
niche market, which is automotive
industries.
The buyers are found in certain regions
only. For example, in Malaysia, coals are
mined only at parts of region in Sabah
and Sarawak. Hence, this are the only
geographical area for companies to buy
and ship coal locally.
The decision making of buying the goods
is influenced by a group of process.
Different department in the companies
such as finance, accounting or engineers
have to work together to make the
purchase decision. There should be a
proposal in buying the goods.
The manufacturers directly sell the
products directly to their customers.
There are no middlemen for customers
to purchase the products. For example,
crop farmers that grow and produce their
own vegetation and fruits sells directly to
customers at the farmers’ market. Here,
manufacturer produce and market their
own product to the large market.
Consumer Product
These are the goods that are ready for
the consumption and satisfaction of
humans’ wants. For example, clothing,
food and shelter.
The products are marketed to a large
number of people and individual. As an
example, laptop and smartphones. In
this technological advanced world, these
products are needed in every level of
society. Hence, this product serves a
bigger market that can be potentially
buys the product.
The buyers are found scattered in
different parts of country and world. For
example, the Starbucks Corporation
producing coffees in their coffeehouses
franchise at different geographical areas
and can be accessed anytime.
The decision making of buying these
goods is based on individuals’ needs,
preferences and the ability to purchase.
There is no hassle decision making
process needed.
There are always middlemen such as
wholesaler, agents or retailer in the
marketing channel. Manufacturers are
only producing the products but not
directly sells the products to the
consumers. For example, Innisfree, the
large skincare and cosmetic brand,
manufactures their product in South
Korea but retails their products
internationally by retailing.
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 The goods are marketed rarely induced
with such promotions. This is because
the manufacturers focuses on the
products quality so that the products
speak for itself even with less aggressive
marketing. Also, industrial goods are
needed for production of consumers’
goods. Hence, the products had already
a large number of market size even
without promotions.
The market of industrial goods are
influenced by technological change.
The goods that marketed would be
aggressively promoted by cash
discounts, free gifts, or vouchers in order
to gain competitive advantage from its
competitors. For example, Nivea, a
Germany deodorant company, uses Buy
1 free 1 initiative for customers to buy the
products more. Hence, it also gives cash
discount advantage for the customers in
purchasing the products.
The market of consumers’ goods is
influenced by time, sense of fashion or
sense of preferences.

The industrial Products can be characterized into three major groups, which are
listed as below:

1. Material and Parts:

There are two types of material and parts which are raw materials and
manufactured material and parts. The raw materials are the goods that enters
the manufacture’s product completely. The goods can be categorized as farm
products and natural products. Farm products are products that can be
produced easily, are perishable and commonly used. So, they have to be
handled safely and accordingly. As exemplary, cheese, livestock, and cotton.
Meanwhile, natural products are limited, cannot be reproduced and are
naturally occurring in the Earth. These products are mostly found in bulk and
its value increases if it reaches to the highest rarity. Usually, there will be a
government intervention strategy that would constraint the trade of these
products. For instance, petrol, coal, and iron ore. The manufactured material
and parts is the goods that manufacturers’ have to manufactured first before
they can produce the product. The goods can be divided into two categories
which are component materials and component parts. Component materials
are the goods that usually fabricated further in product manufacturing and
companies sell them to their consumers as a final product. For example, woven
in dresses and clothing or iron in steels. Meanwhile, component parts are the
goods that entering the final product process without changing the form of the
products and it is small in unit but making a bigger impact of products’ role. For
example, tires in automobiles or small motors in vacuum cleaners.

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2. Capital Items:

These are the goods that used in manufacturing business and large scale
industry possible. They are long lasting goods that facilitates developing and
managing finished products. The goods are influenced with the number of
capital that the company can invest on. The higher the investment, the higher
the capital goods that can be obtained. On the other note, if the company could
not sustain their revenue highly, the capital goods can bring negative impact to
the company. It can be divided into two groups which are installation and
equipment. Installation are goods that have to be installed for business to run
and usually will be used in such a long time. There are no marketing efforts that
needed to be done but it helps to build reputation to the company directly. For
example, buildings, heavy equipment, and furniture. When the company could
achieve a huge number of factories plant internationally, customers will
perceive that the products are made from an established company which can
be trusted. These goods will directly be bought from the producers and would
take a long negotiations process. Producers focuses on personal direct selling
so it can be customized to company’s preferences. Meanwhile, equipment are
goods that compliments the installation goods. It does impact the business to
run but it is not embedded on the finished products. For example, factory
equipment and tools and office equipment. These goods have shorter life span
than installation goods but have longer life span than operating supplies. These
goods are usually sold through intermediaries because the demand of the
products are geographically dispersed, numerous buyers and usually ordered
in a small quantity. Companies will consider of the goods’ quality, features, price
and service before purchasing.

3. Supplies and Business Services:

These two goods are known as MRO goods, which means maintenance, repair
and operations goods. Supplies goods are the goods that used in the business
process, facilitate and managing finished products but it has a short term life
span then other goods. It is necessary and crucial for day to day operations.
These goods are usually bought from intermediaries because the reach of
supplies is far and wide inside the company. The goods can be divided into two
groups which are maintenance and repair items and operating supplies.
Maintenance and repair items examples are paints, nails and brooms.
Meanwhile, operating supplies examples are A4 papers, stationaries, and
lubricants. Business services are the third party service providers that help
companies to run their business smoothly. The services can be broken down
to two groups which are maintenance and repair services and business
advisory services. Maintenance and repair services usually supplied under
contract and companies would open a tendered documentation for small
producers or manufacturers of the original equipment. As exemplary, window
cleaning, copier repair or painting services. Business advisory is needed when
it is required on the basis of supplier’s reputation and staff. The advisories are
mostly professionals that are outsourced by the company to do jobs or tasks
that cannot be carried by employees inside the organization. For example, legal,
management consulting or advertising. These professionals are needed by

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companies to run smoothly and to perform business processes very well. As a
consequence of, skills and human capital deficiencies, companies have to hire
third party professionals to perform the tasks. KPMG (Klynveld Peat Marwick
Goerdeler), PwC (Pricewaterhouse Coopers) and McKenzie are the most well-
known outsourced companies that being hired for advisories in legal, financial
accounting and auditing.

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QUESTION 5
Analyze on how companies find and develop new-product ideas and
define the steps in the new-product development process.

Different companies use different ways to find and develop new-product ideas
but generally, there are two ways for companies to implement which are interaction
with employees and interaction with outsiders. Companies that implemented
interaction with employees focuses on ideation from inside the organization and
institution despite the managerial or operational level. Most companies that
implemented this method promotes innovation inside the organization or institution in
order to improve the development of products and services. Strategically, the company
gathers the pool of creative subject matter experts from different backgrounds of work
to contribute in ideation process. For example, Toyota gathered their products and
services ideation from their employees from all levels and received 2 million ideas
submission annually. They reported about 85 percent from the ideation that gathered
are now implemented in the organization. Other than this, companies also
implemented interaction with outsiders’ method for products ideation. In this method,
companies focusing on ideation outside the span of control of the organization or
institution. This method promotes outsiders’ involvement with customers, external
agencies, competitors or overseas sources and rewards for boundary-spanning to
foster cooperation between design engineers and marketers. For instance, Starbucks
Corporation launched a “My Starbuck Idea” platform, which a crowdsourcing of
ideation from its consumers via social media platforms and puts the company as first
adopters for social media engagement. This platform had already received over
190,000 ideas and implement over 300 ideas out of it that focuses on products, in-
store experience and involvement of Starbucks towards the society. Consumers could
post any idea, vote for any interesting ideas that posted by other consumers and help
uplifting human collaboration initiatives of the company.

The new-product development process consists of eight steps altogether. Each

steps are crucial in order for companies to track if the product is contributing to high
profitability. The definition of new-product development process steps is as below:
1. Idea generation:

This is the first and foremost step in new-product development process. In this
step, companies would gather ideation based on interaction of employees or
using outside involvement. The ideation could be improving the existing
products and services or creating a new value offering to the customers. In here,
companies would brainstorm creatively to distinguish the new product from the
existing products and to improve themselves towards excellence.

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2. Idea screening:

In this step, companies are shortlisting the ideas that could be implemented.
Companies at this stage will drop poor ideas as early as possible to avoid any
substantial costs in future. So, the executive committee reviews each idea
against set of standardized criteria and rates the ideas using a weighted index
method. The higher the score, better chances for it to be implemented.

3. Concept development and testing:

In this step, companies would present the idea or description of the new product
to potential buyers and later on to obtain information regarding buyers’ reaction,
companies would present its prototype. This is where companies would open
for criticism that involves stakeholders outside the organization regarding the
new products’ ideas to improve its feasibility and if the products are making
sense towards the customers’ needs and desires. This step acts as a
“gatekeeper” before the idea could be marketed to the targeted market.

4. Marketing strategy development:

In this step, companies would be focusing on the right marketing strategy of the
new product to be implemented. The company would gather different
organization’s department to identify and analyse the suitable targeted market.
Here, the company’s goal is to meet its marketing objective which are creating
demands for the new products, able to communicate the product to its targeted
market and able to retain its value which benefits the market.

5. Business analysis:

In this step, the company have to reassess if the product is making its profit.
The executive committee would formally estimate the costs, sales and profits
and projects the forecasts information to make sure products are satisfying
company objectives. Here, companies can use different approaches such as
examining sales histories of similar projects, surveying market opinion, subject
matter expert opinion or statistical models to estimates the numbers.

6. Product development:

This step focuses on research and development, prototyping products and

testing the product. This is where the ideation of products is physically produced
and would be running series of tests to ensure the quality of the products is at
par. This step also to ensure that the products are practically safe to be use in
normal conditions and can be produced under budgeted manufacturing costs.
The Research and Development team is crucial in this step because they had
to gather a lot of information regarding customers’ preferences to make sure
that the products are technically and commercially feasible to be introduced into
the market.

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7. Market testing:

In this step, the commercially feasible products are ready to be branded with
name, logo and packaging for them to be introduced into the market. There are
some companies that skipped this step because of the cost and time consuming
process of market testing. On the other note, this step is crucial for high
investment and high risk product in order to prevent huge failures because it
would contribute to company’s losses. Methods that can be used in test
marketing are stimulated store technique, sales wave research, controlled test
marketing, and actual ‘test marketing’.

8. Commercialization:

Lastly, in this step, this is the point where the products are introduced on a full
scale basis to the entire market. Companies have to make sure that the
introduction is carefully planned with special reference to the reactions of
potential buyers’ and competitors’ characteristics. Manufacturer have to be
prepared to implement mass production of the products and try to minimize its
cost of productions. The timing of products’ launching is also should be focuses
on to ensure national and international distributions are going smoothly.

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QUESTION 6
Describe the major strategies for pricing initiative and new products.

In introducing a new product, producers need to have a suitable strategy for the
new products pricing. This is to ensure that consumers can appreciate the products
and the value of it by suitable pricing that companies put on the products Thus, there
are two major pricing strategies that generally used when dealing with new products.
The strategies are Penetration Strategy and Skimming Strategy. Both of these
strategies have different characteristics.

In Penetration Strategy, companies would set a low price to the new product to
gain customers’ loyalty in buying the product over and over again. In this strategy,
companies focusing in market penetration, instigate market growth and capturing large
share from the market segmentations. Even so, there would be an expense for
profitability. This strategy could give profitability to the company in the long run and
companies should not expect a fast profit from this strategy. That is why it is advisable
for companies to use this strategy if the market is highly price sensitive, product is
favourable by economies of scale in production, or where low price increases
competitive advantages in the marketplace. With this strategy, companies be able to
reach profitability if customers are increasing their sales volume of the products. As
an example, Ikea the biggest furniture retailer, they attract customers to buy products
in high sales volume by reducing its price. When price is low, customers would tend
to buy the products impulsively which contributes to a healthy profit margin for Ikea in
the long run.

In Skimming Strategy, companies would set a high price to the new products to
see customers’ willingness in buying the product. In this strategy, companies would
take advantage of customers that willing to pay much higher price because they have
high desires towards the product. After setting the price high, the company would
receive premiums from the customers and after some time they would reduce price
progressively to attract new level of niche market segmentations. This pricing strategy
is suitable if the demand is inelastic because of there is a large number of buyers. The
products that are produce are small in batches but the company could gain profitable
sales. Apple is the best example that is using this pricing strategy. When introducing
a new product, the price for the product will start at a very high setting. Even so, there
are customers that still buying Apple products despite the price is in the high setting.
Apple had been making profitable sales because of taking advantage of tapping all
levels of market segmentation.

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