Having analyzed the products’ life-cycles prepared by other analytics it is possible to make some changes to the products’ price policy in order to increase the total revenue. There are three products: X5, X6, and X7.
X5 – Customers aren’t worried about performance. It is on the market for 3 years. This product could be classified as the one that refers to the decline phase of its life cycle. Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change.
X6 – Customers care about performance, not price. The product is on the market for 2 years. This product is considered to be on the growth stage, the period of rapid revenue growth. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. The best decision is to think about a nice promotion.
X7 – Customers care about price and performance. The commodity is on the market for 1 year. Large expenditure on promotion and advertising is common, and quick but costly service requirements are introduced. A company must be prepared to spend a lot of money and get only a small proportion of that back. Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies.
The Financial review for the product X5 shows the following indicators:
The sales of this product are at the highest level and equal $968 980.
The costs are divided into the Fixed costs ($75 000 000), Variable costs ($145 346 882) and R&D costs ($11 820 896). Total costs equals $232 167 777. As the revenue amount $ 276 159 075, the total Profit account $43 991 298 and the profitability is at the level 16%.
The prices for this product are at the highest and amount $430.
So, the required volume equals 800 579. In this case the ROS equals 0.14%.
The Financial review for the product X6 is associated with the following indicators:
The sales do not reach the highest possible level, they are medium. They are expected to grow in the nearest future.
The costs referred to it are as follows: the Fixed costs ($37 500 000), Variable costs ($ 154 814 256) and R&D costs ($ 12 179 104). Total costs equals $ 204 493 360. As the revenue amount $ 242 073 200, the total Profit account $37 579 840, and the profitability is at the level 16%.
The prices are at the medium level and equal $323.
Thus, the required volume equals 1259468. In this case the ROS equals 0.20%.
The Financial review for the product X7 is connected with the following indicators:
The R$D costs equals $ 700 000; Fixed Costs are at the level $ 15 000 000; and the targeted profit is $ 250 000.
As the product is the new one, the sales, costs and, relatively, profitability equal 0.
The prices are …
Posted by: Amira Smale