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ACKNOWLEDGEMENT
All gratitude and thanks to almighty “ALLAH” the gracious, the most merciful and beneficent
who gave me courage to undertake and complete this task. I am very much obliged to my ever
caring and loving parents whose prayers have enabled to reach this stage.

I am grateful to almighty ALLAH who made me able to complete the work presented in this
report. It is due to HIS unending mercy that this work moved towards success.

I am highly indebted to my course instructor for providing me an opportunity to learn about the
“which is vital ingredient” of M.BA program. I am very grateful to my teacher () for providing
me guideline for the completion of this report.

I feel great pride and pleasure on the accomplishment of this report.

 DEDICATION

This report is dedicated to the greatest man in the world that shows us the right path. Who is the
great patron of the mankind that is Holy Prophet Hazrat Muhammad (PBUH).

I would also like to dedicate this small effort of extract to my Parents and Teachers. They have
always been a shining star to look upon, to give light and to show me the directions whenever I
am lost. May Allah give them more strength and long life to guide me forever. Ameen
 Abstract
The goal of product line pricing is to maximize profits. The more features offered, the more
consumers will pay. The goal is to draw enough interest in the primary product that the upgraded
product will be sold (at a greater price) based on the interest in the “basic” primary product. By
using PLP, some individual products may not make profits, but the goal is for the product line as
a whole to turn a profit.
Product line pricing is seen from gas pumps to car dealerships and from ice cream shops to fast
food restaurants. A basic car wash may be shown as one price, a super wash with wash and wax
will cost a little more, and a full-service premium wash will be the most expensive. Price
leadership is the situation in which a market leader sets the price of a product or service, and
competitors feel compelled to match that price. A company has price leadership when it sets the
price of products in its industry and other companies, often much smaller than the leader, all
follow suits.
This usually happens when the products are not highly differentiated and there is enough demand
for each of the competitors to remain profitable after the price change.
Price leadership is regarded as imperfect collusion among the oligopolistic firms, where all firms
follow the lead of one firm. The firm which takes the initiative of setting the price and
announcing changes in price from time to time is called as price leader. He fixes the price by
implicit understanding rather than formal agreement.
The price leader is generally a leader in all the markets for long periods. He can maintain his
leadership by pursuing a definite and a consistent price policy, i.e., by using his power with
restraint. The leader should change the price, when he feels that the change in cost and demand
conditions are permanent to maintain followers’ loyalty, i.e., when the market is ready for the
change.
The Product Lifecycle Model

The product lifecycle model covers the stages of a product from launch to being discontinued.
While the model will differ depending on your product and where you are on the timeline, the
principle remains sound.

There are very obvious variations within industries and sectors. The high fashion industry, for
example, tends to have a very short life span of 13 weeks full price and 13 weeks sale price
which is repeated over the year with two main seasons, although increasingly there are interim
mid-season promotions happening to match the unpredictability of the British weather.

However, an industry focused on producing a product that supplies a need – such as a kitchen
utensil or a medical instrument – will have a life span over many years until it is superseded by a
new innovation in the industry.

This makes the planning process unique to your own business.

This diagram shows the Product Life Cycle with the Adoption model superimposed which
gives you the context in which you should use this model.

You should recognise the position of your product on the curve and be aware of a few issues that
place raises for your pricing strategy and your marketing strategies.

 At the introduction phase of your product you should look at how your pricing strategy
reflects the newness and hopefully unique attributes. This is the time when, in some
industries, you can charge a premium and recoup the development/market launch costs
allocated to your product.Using this pricing strategy, if we drew a pricing line on this
diagram it be the exact opposite of the curve in the early stage – in other words, pricing
 high initially and then flattening toward the decline of the product. This high price at the
beginning is known as ‘skimming’ or ‘creaming’ the market. It can only last until the
next product or a newer technology arrives in the market.

If you decide not to ‘skim’ but to compete on price, this is known as market penetration pricing
and can be quite dangerous especially if it leads to loss leader strategies – not recommended
unless you have deep pockets.

 Whilst in the growth period it is advisable to be looking at how you are going to

maintain the growth. This is where international markets begin to become part of the
equation.New markets will offer you two things:
 A chance to extend your growth period and give you time to develop your next
product
 A chance to price high in a new market where your product is new.

Marketing Strategy Changes

During the period of growth you may also find that changing the product is not needed
but changing your marketing is. A marketing strategy that reflects the latest trend or the
longevity of the product quality is another way of maintaining your product at the peak of its
maturity curve and to get the maximum return on your investment.

Usually, a pricing strategy is a mixture of industry knowledge and a gut feeling. However, the
more research you do in international markets, the less guesswork is involved.

Working with this product lifecycle model and linking it with ‘unit price’ calculations, which
reflect the cost of marketing and researching new markets, will produce a successful long term
strategy for your business.

It builds sustainability into a start up business and turns it into an international business.

ust like people, most products go through several distinct phases during their lifetime. Once
products are introduced, they'll go through periods of growth, maturity and eventual decline.
That's referred to as the product life cycle, and understanding how it works can guide you in
setting the price of your products and in tweaking your business strategy.

Looking at the Life Cycle

The gestation period for a new product is usually referred to as the development stage. That's
when the original idea is transformed into prototypes, tested, and sometimes given to small
groups of users for evaluation and feedback. You don't have a marketable product yet at that
stage, so it doesn't directly play into your pricing strategy.

Phases in the Life Cycle

The next step is the introduction phase, where your product is rolled out to the market to sink
or swim. If it finds willing buyers, you'll move on to the next phase in the product life cycle,
which is growth. That's the exciting time when your product is gaining traction, and you're
breaking into new markets and demographics.

Eventually, your growth will plateau, as the market for your product becomes saturated, and
your sales come more from replacement purchases than from new purchases; that's called the
maturity stage. Finally, comes decline, the period in which your product is being edged out of
its market by newer or – maybe – better products. Your pricing strategy should recognize, and
take advantage of, your product's place in its life cycle.

Setting the Initial Price

There are two ways you can go with pricing when you first introduce your product. If it's a big
advance over the older products in your niche or if it does something entirely new or represents
a new technology, you may be able to demand a premium price for your product in its early
days. That helps you recover your R&D costs in a hurry, and early adopters are often not price-
sensitive, if your product meets a real need.

On the other hand, if your product is so different that people need to try it to really grasp its
potential, you might need to offer it at a reduced introductory price, just to attract attention and
generate some word of mouth. You might even need to give away free samples, which is what
3M had to do when it introduced Post-it Notes.

The Growth Phase

During the growth phase, you'll be able to ramp up production, which helps bring down your
cost per unit. If you're able to reduce your selling price while keeping your profit margins
healthy, you'll be in a position to profit happily from your product's popularity. One way to
maximize your revenues is by plowing some of those profits into opening new markets and
distribution channels, so that you can capitalize on your product while it's at its hottest. At this
point, you'll have paid down much of the product's R&D cost, so it's time to start funneling a
few dollars into your next product, and for improvements on your current one.

The Maturity Phase

Eventually, any product reaches a point of stability, where your markets are fully penetrated,
and growth gradually slows to a relative standstill. Even if your product originally was a
ground-breaking product, you probably now have competitors who offer something similar.
This is the stage in which you stand to make the most money from your product, because you'll
already have plenty of awareness in the marketplace, and your R&D costs are long-since paid
off.

As long as you can find ways to differentiate yourself from your competitors, your product can
continue to be a cash cow. Even in a scenario in which cost-cutting rivals force you to reduce
your prices, you should have plenty of room to make a buck.
The Decline Phase

It's simple folk wisdom that "all good things must come to an end," and that's the case for most
products, as well. Over time, new products or new technologies come along, and sales of your
product will begin to ebb. At this stage, you'll probably have worked out all the kinks in your
manufacturing process, and your costs now are as low as they'll ever be, so you have the option
of lowering prices to keep the product as attractive as possible. Ideally, you'll also have new
products at various stages of their own life cycles, so the drop in demand for one won't create a
crisis for your business.

Knowing Where You Are

You'll know when your product is in its introductory and growth phases, because it's still
relatively new, and your sales figures will tell you the whole story. The real trick is knowing
when your product slides from maturity into decline, and then taking the appropriate steps to
maximize your profit from it.

If you're feeling the effects of a larger drop in the economy, for example, your product might
not be in decline yet. Waiting out that business cycle, or throwing additional money into
marketing, in an effort to crowd out competitors in your customers' eyes, can help prolong the
life of your product. Giving up on it too soon, and reducing your manufacturing or marketing
efforts, can become a self-fulfilling cycle.

Postponing Product Decline

Most products rise and fall, but a few manage to remain solid sellers year after year, despite the
maturity of their markets. Coca-Cola has been at the mature stage of its life cycle for a century
or so, and it continues to lead in its market segment. That's unusual, and most companies need
to put in a bit more effort just to stay in the game.

The usual strategy is to find ways to refresh your product, through new features or added
abilities. Just think: How many times has your favorite laundry detergent been "new and
improved" in your lifetime? If you can find enough ways to keep your product competitive
with its peers, then, sometimes, you can prolong that profitable maturity stage for a very long
time.

During the introductory stage the firm is likely to incur additional costs associated with the initial
distribution of the product. These higher costs coupled with a low sales volume usually make the
introduction stage a period of negative profits. During the introduction stage, the primary goal is
to establish a market and build primary demand for the product class.
Price under Introduction Stage:
Generally high, assuming a skim pricing strategy for a high profit margin as the early adopters
buy the product and the firm seeks to recoup development costs quickly. In some cases a
penetration pricing strategy is used and introductory prices are set low to gain market share
rapidly.
Growth Stage:
The growth stage is a period of rapid revenue growth. Sales increase as more customers become
aware of the product and its benefits and additional market segments are targeted. Once the
product has been proven a success and customers begin asking for it, sales will increase further
as more retailers become interested in carrying it.
The marketing team may expand the distribution at this point. When competitors enter the
market, often during the later part of the growth stage, there may be price competition and/or
increased promotional costs in order to convince consumers that the firm’s product is better than
that of the competition. During the growth stage, the goal is to gain consumer preference and
increase sales.
Maturity Stage:
The maturity stage is the most profitable stage. While sales continue to increase in this stage,
they do so at a slower pace. Because brand awareness is strong, advertising expenditures will be
reduced. Competition may result in decreased market share and/or prices. The competing
products may be very similar at this point, increasing the difficulty of differentiating the product.
The firm places effort into encouraging competitors’ customers to switch, increasing usage per
customer, and converting non-users into customers. Sales promotions may be offered to
encourage retailers to give the product more shelf space over competing products. During the
maturity stage, the primary goal is to maintain market share and extend the product life cycle.
Price under Maturity Stage:
Possible price reductions in response to competition while avoiding a price war.
Decline Stage:
Eventually sales begin to decline as the market becomes saturated, the product becomes
technologically obsolete, or customer tastes change. If the product has developed brand loyalty,
the profitability may be maintained longer. Unit costs may increase with the declining production
volumes and eventually no more profit can be made.

Price under Decline Stage:

Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained
for continued products serving a niche market.
Product Line Pricing (PLP):
Product line pricing is a pricing strategy that uses one product with various class distinctions. An
example would be a car model that has various model types that change with performance and
quality. This pricing process is evaluated through consumer value perception, production costs of
upgrades, and other cost and demand factors.
Product line pricing is used when a primary product is offered with different features or benefits,
essentially creating multiple “different” products or services.