What should the pricing strategy be in the maturity phase?
The maturity phase is where markets spend most of their time. If it had a sign, it would read: “Welcome to the harsh reality.” Here, competitive conditions intensify, customers become more price-sensitive, and the focus must shift from gaining market share to maximizing profitability.
MARKET LIFE CYCLEMATURITY
In this stage, relationship buyers evolve into value buyers. And convenience buyers tend to become price buyers, thanks to the greater availability of alternatives.
This concentrates demand in the value and price segments, while the relationship and convenience segments lose weight.
Companies that consolidated a cost-leadership strategy during the growth phase will be able to compete effectively in the price-buyer segment. Those that developed sustainable differentiation will have more opportunities in the value-buyer segment.
Most price wars break out in mature markets, when several companies attempt to “buy” share with aggressive discounts. But that should not be the objective.
Maximizing profitability is the priority. To achieve this, there are four tactics that can make a difference:
Unbundling solutions
During the growth phase, many companies offer integrated solutions. But when the market matures, customers become more knowledgeable and prefer to choose the best supplier for each component separately.
This happened in the 1980s with personal computers: IBM excelled in CPUs, Samsung in monitors. Brands that did not dominate all components could stay in the game thanks to unbundling.
Adjusting price levels
In this phase, companies already know the elasticity of their products well thanks to their history of promotions and price movements. This allows for more precise decisions.
A company that sells in the inelastic zone of the demand curve can raise prices without significantly affecting sales. Another, in the elastic zone, may benefit more from reducing its price to increase volume and gross contribution.
Redefining price thresholds
With highly sensitive demand, it is essential to know incremental costs in order to understand how far the price can be lowered without destroying value.
This knowledge supports rational decisions in bids or sales below marginal cost for perishable products, such as industrial foods or past-season apparel in outlets.
Expanding the solution range
When the profitability of the main solution declines, high-margin complementary products can be launched. Smartphone and tablet companies have done this with accessories such as cases, keyboards, or speakers.
These products help recover profitability in a market that no longer grows and where margins tighten.
What if the market enters decline?
When substitutes begin offering better solutions than current ones, the market starts to contract. And pricing strategies must adapt again.
That will be the subject of the next stage of the analysis: the pricing strategy in the decline phase.