The manufacturer is manufacturing antique-style furniture that is really differentiated in the sense that it is very unique in outlook. The features fitted on the desks are clear indication that they will in one way be special in the market. Considering that the price of a product to a large extent determines how the product fares, it is quite important that the price charged be appropriate. Before setting the price for a commodity, it is important to take into mind various factors that will normally be realized after a thorough marketing research.
The manager in this case is trying to gain a market lead by penetration pricing.
This is the setting of a lower price to attract many sales in the market so as to enhance dominance in the market (Brown, pp25). The marketing manager in the given case may therefore be justified in setting a lower price in the market. Setting a lower price is a good strategy of capturing the market within a short time frame. It comes from the fact that the consumers will always seek to spend less and less for more and more. The desks may therefore sell better in the market courtesy of the lower price that is charged. The low price charged will greatly determine the performance of the business in the long-run. From the managers’ scheme, it is inherent that the market for such desks is inundated with a lot of risks.
Operating in a risky business environment requires the advantage of huge sales (Monroe, pp69). The strategy for low costs is therefore timely considering the need to cover all the risks. However, the low-cost strategy may not be appropriate for the business in marketing the desks. The manager can capitalize on the fact that the desks are differentiated to capitalize on the price. Antique products normally are a treasure to many people.
The price charged will also determine buyers of a particular product. A higher price is likely to drive away low-income buyers who will find the desks quite expensive. However the impact of the high price will not be grave considering that the high price will attract many high-income earners.
Rationale in fixing prices
Several studies have shown that many products normally disobey the law of demand (Monroe,pp63). It has been seen that for certain products, an increase in the price increases the demand for such products. This is common in products that are special in one way or another. The desks, considering that they are antique in manner may evoke a sense of specialty in outlook, will automatically fall into that category.
It would therefore be appropriate to sell the desks at a higher price than the conventional desks in the market. That will make many people seeking elegance and valor to buy the desks. For instance a price double the market rate will greatly attract many high income earners to buy the desks thereby boosting the revenue more than if the desks were priced at a lower price than the market rate. Most of the other pricing strategies may not be appropriate in marketing these desks considering their nature.
For instance predatory pricing may not be very appropriate since the firm is a new entrant in the whole market (Brown, pp27). It would therefore not be wise for the manager to use any other strategy in pricing of the products in the market. The manager may consider either of the two alternatives outlined above. He can continue with the low price mechanism which may be a short term strategy since the competitors may respond by pricing their products even lower.
Alternatively the desks can be slightly upgraded in quality so as to price them above the normal rate and gain competitive advantage.
Brown, Michael. Marketing In a Global Perpective. New York: Prentice Hall, 1999. Monroe, Kent. Pricing Strategy Audit.
Cambridge: Cambridge University Press, 2003.