#PRICE PENETRATION PORTABLE#

This strategy also fit in with the company's desire to penetrate the market quickly.īut by using an existing product as the reference point, the company undervalued a revolutionary product. The company then took the price of the older, stationary readers and raised it proportionally, solely to account for the time savings.

#PRICE PENETRATION PORTABLE#

One of the first makers of portable bar code readers, for example, calculated how much more quickly its customers would be able to assemble their own products if they used portable readers. The incremental approach often underestimates the value of new products for customers. Particularly in consumer markets, they might set the price slightly higher or lower than that of their main competitor. If a new offering costs 15 percent more to build than the older version does, for instance, they charge about 15 percent more for it. These concerns encourage companies to take an incremental approach to pricing: they use existing products as their reference point. Many companies want to make a quick grab for market share or return on investment, and with high prices both objectives can be harder to achieve. Global competition, increased pricing transparency, and lower barriers to entry in many of the most attractive industries have contributed to the trend. It is true that businesses and private consumers alike are demanding more for less the prices of personal computers, for example, have been pushed downward despite their higher processor speeds and additional memory.

In our experience, 80 to 90 percent of all poorly chosen prices are too low.Ĭompanies consistently undercharge for products despite spending millions or even billions of dollars to develop or acquire them. And as companies have found time and again, once prices hit the market it is difficult, even impossible, to raise them. Charging too little is far more dangerous: a company not only forgoes significant revenues and profits but also fixes the product's market value position at a low level. How much should you charge for a new product? Charge too much and it won't sell-a problem that can be fixed relatively easily by reducing the price.

Price penetration