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2.2 Competitive Pricing
<< A company needs to understand the competition prior to choosing
its marketing activities / executing on its marketing programs. In the
high-tech industry, be it hardware products like multi-core servers or
core Internet routers or blackberry handhelds and iPhones; Game
Theory forms core of competitive pricing. The pricing strategy must
also be comprehensive, and must not ignore pricing theories ranging
from penetration pricing to skimming pricing.
Typically, if a companion MRD is available for the product, analysis of
various business situations using Game Theory concepts such as
Dominant Strategy, Nash Equilibrium, Max-Min Strategies, Mixed
Strategies, Tit-for-Tat Strategy, Repeated Games, etc. should be part
of the MRD. This depends on whether Product Management can
influence product pricing. (
Note:
If in doubt, follow this management
mantra: AS A MANAGER, YOU HAVE MORE SPACE THAN YOU
REALIZE.)
>>
2.3 Cost-Based Pricing
<<Contrary to intuition (this applies specially to engineer turned product
managers), cost-based pricing is a somewhat complex affair,
economically speaking. Even if you are economically savvy and
understand that profit is maximized where marginal revenue (MR)
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