Huojin is developing a pricing strategy for his start-up company. He decides to introduce the new product at a relatively high price; then, as technology advances allow him to lower the cost of making the product, he plans to reduce its price before competitors can. Which pricing strategy is Huojin using?

Question

Business

Luke Monroe

30 April, 07:45

Huojin is developing a pricing strategy for his start-up company. He decides to introduce the new product at a relatively high price; then, as technology advances allow him to lower the cost of making the product, he plans to reduce its price before competitors can. Which pricing strategy is Huojin using?

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Answers (1)

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Tianna Lozano · Answer 1

In this case, Huojin is basically using Life Cycle pricing strategy.

Explanation:

In Economics, life cycle pricing strategy basically refers to the determination of any product or service price based on the position of the concerned product or service within its life cycle. In this instance, Huojin decides to charge higher price for its new product as the production or manufacturing is relatively high during the initial stages of the product. Later on during the product life cycle, the manufacturing or the making cost of the new product gradually decreases thereby, allowing Huojin to reduce the price of the product during the subsequent stages of the its life cycle. Such type pricing strategy is known as Life Cycle pricing strategy.