Copyright © 2023 by ETS. All rights reserved. ETS, the ETS logo, TOEFL and TOEFL IBT are
registered trademarks of ETS. TOEFL GOLEARN! and the T logo are trademarks of ETS. All
other trademarks are property of their respective owners.
Speaking Practice Question 4: Integrated Speaking Practice (Academic) --
Lecture and Question
Directions: Read the transcript.
Narrator Now listen to part of a lecture in a business class.
Professor Today, we’ll talk about how companies determine the initial price for their
products, by that I mean, when they first introduce a product in the market. There
are different approaches, and today we’ll discuss two of them. They are quite
different … each with their own advantages.
One approach or strategy sets the initial price of the product high, followed by a
lower price at a later stage. Why? Well, … when introducing a new product,
companies want to build a high-quality image for it. Products that cost more are
believed to be of higher quality. So, during the early stages of the product life
cycle, companies can make very high profits from consumers willing to pay more
for a high quality product, and although consumers know that prices will
eventually go down, they’re also willing to pay more to get the product sooner.
This approach works very well with … oh … innovative, high-tech products, for
example. Now just think about when video recorders, or … video cameras … or
even cell phones … first came out.
They were very expensive, but then they became much more accessible.
Another very common strategy sets an initial price low. Now this happens when
the market is already saturated with the product and the strategy is to undercut its
competitors. Say, there’s a newly starting computer maker trying to gain market
share. So what do they do? Well, they offer a computer at an affordable price,
lower than existing brands. By doing this, the company appeals to new consumers
who weren’t probably even interested in getting a computer and … well, of course
… to existing consumers who might now be tempted to switch brands. Now, how
does this company make profits with its low-priced computer? Well, one thing
that’s often done is to encourage their customers to buy accessories also
manufactured by them, like printers, or software, for example.