Pricing and Profitability Management: A Practical Guide for Business Leaders

Identifying and Using the Principal Pricing Archetypes

Increasingly, companies have come to rely on several archetypes to address common pricing situations over a product's entire lifecycle. These archetypes can serve either as blueprints for an overall pricing strategy or as components of a plan. Pricing archetypes are not mutually exclusive and may be used individually, in combination, or interchanged throughout a product's lifecycle. All of the archetypes may be in use simultaneously at a large company that has many different products and products lines at various stages of their lifecycles.

While not an exhaustive list, the classic models to be discussed in this chapter are characteristic of typical pricing strategies used in the marketplace today:

• skim pricing: extracting the most value from the product adoption curve
• penetration pricing: aggressively entering and defending markets
• revenue management or elasticity pricing: changing the price based on the unit response and limited inventory
• performance pricing: deriving value from a product's benefits
• prestige pricing: conveying status, exclusivity
• phase-out pricing: discontinuing a product.

Skim Pricing

This strategy aims to maximize the value captured from customers at each point in the product adoption curve.

For example, in early 2007, Apple was preparing to unleash its latest technological innovation, the iPhone. The company had used a savvy marketing campaign to generate high consumer demand before launch, and reviewers ...