Interactive Lesson

Topic 3.3: Product & Price

AO1 Knowledge | AO2 Application | AO3 Analysis | AO4 Evaluation

📋 THE CLIENT BRIEF

Company: GizmoWatch (Smartwatch Manufacturer)

Problem 1: Gizmo V1 (launched 2019) is in the Decline stage. Sales have dropped 60% over 2 years.

Problem 2: Gizmo Ultra (new flagship) is ready to launch. You must choose the pricing strategy.

Your Mission: Save Gizmo V1 and Launch Gizmo Ultra successfully.

🔧 THE TOOLKIT (AO1 Knowledge)

The Product Life Cycle (PLC)

Every product goes through 4 stages from birth to death:

1. Introduction

Low sales, High costs (R&D, marketing), Negative profit

2. Growth

Rising sales, Profit starts, Competition increases

3. Maturity

Peak sales, Highest profit, Market saturated

4. Decline

Falling sales, Falling profit, Product becomes outdated

Extension Strategies

When a product reaches Maturity or Decline, businesses can inject new life:

New Packaging: Redesign to look modern (e.g., Coca-Cola seasonal cans)
New Markets: Sell in different countries (e.g., Launching in Brazil)
Price Reduction: Make it affordable to more people
New Features: Add upgrades (e.g., "Gizmo V1 Pro" with GPS)

Pricing Strategies

Cost-Plus: Cost + Markup % (e.g., $50 cost + 60% = $80 price). Simple, guarantees profit.

Penetration: Low price to grab market share fast. Good for mass markets.

Price Skimming: High price for unique/luxury products. Targets early adopters.

Competitive: Match rivals' prices to avoid price wars.

Promotional: Temporary discount (BOGOF, 50% off) to boost short-term sales.

🧪 THE LIFE CYCLE MANAGER (AO2 Application)

Visual: Product Life Cycle Graph for Gizmo V1

Selected Stage: DECLINE

Sales: Falling

Profit: Low

⚠️ EXAMINER TRAP:

"Should we apply extension strategies during Introduction?"

NO! Extension strategies are for products in Maturity or Decline. New products need Promotion and Distribution, not extension.

Mark Scheme: "Student incorrectly applies extension to Introduction stage - 0 Marks (AO2 Application)"

💰 THE PRICING WAR ROOM (AO3 Analysis)

Challenge: Set the launch price for Gizmo Ultra

Select Pricing Strategy:

💡 Context Matters (AO2):

The "best" price depends on GizmoWatch's objectives:

Objective: Maximize profit quickly? → Skimming ($500)
Objective: Gain market share? → Penetration ($100)
Objective: Balanced growth? → Competitive ($275)

⚠️ EXAMINER TRAP:

"Can we use penetration pricing for a luxury smartwatch with unique AI features?"

Technically yes, but BAD strategy! Penetration suits mass markets. Luxury/unique products should use skimming to maintain brand image.

Mark Scheme: "Student chooses inappropriate strategy without justification - Maximum 1/4 marks (AO4 Evaluation)"

📖 BUSINESS GLOSSARY (Pop-Up Definitions)

🎯 KEY TAKEAWAYS (Exam Success)

AO1: Know the 4 PLC stages and 5 pricing strategies by name.
AO2: Always apply strategies to the specific business context (not generic answers!).
AO3: Use BLT chains to show cause → effect → impact.
AO4: Justify pricing choices based on business objectives (profit vs market share vs brand image).

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