Synthesis Technologies is a maker of hybrid stereo equipment. For the last few q
ID: 397676 • Letter: S
Question
Synthesis Technologies is a maker of hybrid stereo equipment. For the last few quarters, it has experienced a decline in profits and market share, but it is hoping to end that cycle with a new line of speakers. Within the next year, Synthesis hopes to increase its net profit by 10 percent, gain an additional 25 percent of the market share, and increase the number of repeat customers by encouraging current Synthesis speaker owners to invest in the company’s new offerings. After carefully developing the other elements of the marketing mix, Synthesis is faced with the decision of how to price these speakers—especially since its main rival, Bormuiser, is developing a comparable product slated for release three months later.
1.) What pricing strategy would be the most logical for Synthesis to use?
2.) In addition to answering the above question, answer one of the following:
a.) What are the company’s objectives in terms of customers, competition, and profit?
b.) What impact does the competition have on pricing?
c.) Would pricing the product above the competition or below the competition be a better idea?
Explanation / Answer
1) It is best for Synthesis to use Aggressive pricing. Since competitors too are going to launch a similar product in the near future it is better for Synthesis to keep the profit margins low and to keep the price of the product as less as possible.Otherwise, there is good chance that the company will lose its customers to the competitors. However, care must be taken that the aggressive price does not lead to losses. For this the company can improve the efficiency and effectiveness of the operations and can have better relationships and partnerships with suppliers so that the raw materials can be procured at lesser prices.
2) c) It is definitely a better idea to price the product below the competition. However, the performance of the company's products must be very good and the customers must be more satisfied with the products. As long as these criteria of low price and better performance are met, the company has a good chance of increasing both the profits and market share.
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