Page 4: Price
Pricing depends on the market. There are many different pricing strategies that a business can apply. Setting a relatively low price can attract customers but reduce the profit margin. This approach is called market penetration. It is often used in highly competitive mass markets with large volume turnover of goods, for example, tins of beans in a supermarket.
However, Forensic Pathways operated in a very different type of market. It was targeting a relatively small customer base police services and security agencies with a new product that had no immediate rivals. This meant the company could choose to set a relatively high price that carries a higher margin. It would allow the company to generate a realistic return on its high development costs.
This approach is called market skimming. It is often the chosen strategy for innovative products. Reductions in price can follow later as competitors enter the market. The company would enjoy first mover advantage, achieving penetration of its market niche without major price concessions.
This strategy relies on IP protection to give competitive advantage over rivals, based on the product's technological capability and the reputation of the Forensic Pathways brand. If other firms steal or imitate these assets, then Forensic Pathways would see slowing sales. Worse, the competition for customers could force the company to push down prices, lowering profit margins and reducing potential for future investment.