TechTales Pvt. Ltd. is a well-known company engaged in manufacturing innovative educational gadgets for children. The company is in the process of developing a new product, a Smart Story Lamp, which allows parents to record bedtime stories and messages for their children when they are not at home. The device has a built-in voice recording and playback system - whenever the child switches on the lamp, the recorded message or story plays automatically, helping parents stay emotionally connected even in their absence. Although this product faces strong competition from different brands in the Indian market. The management of TechTales Pvt. Ltd. is considering a reasonable price strategy to reach customers who are currently using other brands. Identify the pricing strategy that the management is planning to adopt. State any two advantages of adopting this pricing policy for TechTales Pvt. Ltd. Suggest a better pricing strategy apart from the one identified to switch the customer from the other brands.

Question

Accepted Answer

The pricing strategy that the management of TechTales Pvt. Ltd. is planning to adopt is **Penetration pricing**. This is because they want to set a reasonable price to reach customers who are currently using other brands, with the objective of increasing market share and sales volume rather than making short-term profits.

**Advantages of penetration pricing:**

1. It can result in fast diffusion and adoption, achieving high market rates quickly and taking competitors by surprise, not giving them time to react.
2. It discourages the entry of competitors because low prices act as a barrier to entry in the market.

**Another suggested pricing strategy:** The company could also adopt **Skimming pricing** initially for the Smart Story Lamp, since it is a new and innovative product with unique features like built-in voice recording and playback. A high initial price would help recover R&D costs and target quality-conscious early adopters before gradually lowering the price to attract the mass market.