Sample Term Paper
As the demand of hybrid cars is elastic in nature so it is best in favor of Toyota to have a penetration pricing strategy instead of skimming pricing strategy. The most important reason is that because hybrid cars is a relatively new venture, people are just a bit cautious while going for it. The market penetration pricing strategy would allow the company to get into the masses with the label of low price. While doing so the company would have done enough to break that fear related to hybrid cars, which would result in a greater market share and it would gain mass appeal faster. Once the market share is achieved and the consumers have substantial amount of trust in the product, then the company can increase the price (Burke, 2004).
Secondly the reason why market skimming pricing strategy is not advised in this situation is because as mentioned before the hybrid car market is comparatively a new market and if the company would set high prices for its products it would attract new competitors in the market, which would lead towards an inevitable price decrease due to increased supply.
Data collected from the primary research showed that most of the respondents were influenced with the purchasing of hybrid cars because of its low price. The second most popular choice was lower pollution. This shows that mainly the customers are getting attracted with the hybrid cars because of its low price, so the proposed strategy of market penetration should be applied in this case. Also as a matter fact the household income of most of the respondents were ways beyond the price of the Prius so it’s very much affordable to the target market (Williander, 2005).
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