Pricing Strategies & Pricing Wars Bill Saporito takes on the is

In his article, "Price Elasticity Dynamics Over the Adoption Life Cycle," (Journal of Marketing Research, XXIX, August 1992, pp. 358-367), Philip M. Parker examines research regarding price elasticity over the adoption phase of products. Parker contrasts the lack of research in this area with the large body of research that has been conducted with regard to price elasticity over the product life cycle or brand life cycles. Parker puts forth the hypothesis that price elasticities of adoption begin low and then increase as the adoption life cycle matures, a hypothesis that his study rejects. Instead, product factors appear to regulate elasticity dynamics.

Donald Lichtenstein, Nancy Ridgway and Richard Netemeyer examine the effects that pricing has on consum

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ompanies that sell the assets also rearrange their cost structure to better improve their performance. Not all industries are subject to price wars, but in those industries where there is a price war environment, the competition is intense and has a long-term effect on profitability. Prevalent in the snack food industry, Borden combated a price war by the market leader, Frito, by purchasing competitors to the point where it had a 12 percent market share. While this was less than one-third of the share held by Frito, it put Borden in a strong enough position to fend off the competition of a new entrant, Anheuser-Busch. Parker's findings that price elasticity over the adopting life cycle does not increase from a low level to a high level indicates that the entire issue of pricing is more complex than some industry analysts and company managers would like to perceive. Under Parker's traditional assumption that prices can be set high when a product is initially introduced and then reduced as the product is received into the market and more competitors enter the market, managers did not have much responsibility when it came to setting pricing strategy. But Parker's research indicates that this assumption is not valid, and manager
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Approximate Word count = 3578
Approximate Pages = 14 (250 words per page)