During the introduction stage of product life cycle, the firm has no strategic choice in the area of product and distribution. It has to play with price and promotion tools. With price and promotion variables the firm may adopt high profile strategy, selective penetration strategy, preemptive penetration strategy or low profile strategy.
1. High Profile Strategy
A high profile strategy consists of introducing the product with a high price and high promotion levels. Higher price is charged to recover as much gross profit per unit of product as possible. High promotion level is maintained to convince buyers on the merit of the product at the higher price.
This strategy can be applied if potential buyers are not fully aware of the product, and those who become aware of product are ready to pay a higher price for the product. This strategy is implemented to skim the market in a short period of time. Skimming the market means charging high price to a new product.
2. Selective Penetration Strategy
A selective penetration strategy consists of introduction a product with high price and low promotion. Higher price is charged to recover the initial investment and low promotion is maintained to keep the marketing cost down. This strategy can be applied if the market is small, most of the market is aware of the product, and those who want it can afford to pay a higher price.
3. Preemptive Penetration Strategy
A preemptive penetration strategy involves introducing the product at lower price with heavy promotion. This gives the firm rapid market penetration and larger market share in a short period of time. This strategy is suitable if the market is large, the market is relatively unaware of the product, the buyers are price sensitive, there is strong potential competition, and the cost of production declines with increased production levels.
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4. Low Profile Strategy
The low profile strategy involves introducing the product under low price and low promotion levels. Low price is targeted at fast market penetration and lower levels of promotion at keeping the marketing costs down. This strategy is suitable if the market is large, the market is aware of the product, the market is price sensitive and there is some potential competition.
