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Monitor Group Upcoming Events
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IN THIS ISSUE
by John E. Hogan, PhD, Group Leader
In this issue of SPG Insights, we discuss two fundamental and very complex pricing issues: How do I charge different customers different prices? How should I price differently as my product matures?
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SEGMENTED PRICING – USING PRICE FENCES TO SEGMENT MARKETS AND CAPTURE VALUE
by John Hogan, PhD and Thomas Nagle, PhD
The use of segmented pricing—the practice of charging different customers different prices—is a critical element in every marketer’s toolkit. Yet if charging different customers different prices were easy, everyone would do it. So how can it be done? The answer is by creating a profit-driven price structure that varies not just the price, but also the offer or the criteria to qualify for it. This can be achieved through price fences.
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PRICING OVER THE PRODUCT LIFECYCLE
Adapting Strategy in an Evolving Market
by John Hogan, PhD and Thomas Nagle, PhD
Products, like people, typically pass through predictable phases. A product is conceived and eventually “born;” it “grows” as it gradually gains in buyer acceptance; eventually it “matures” as it attains full buyer acceptance; then it ultimately “dies” as it is discarded for something better. Although there are exceptions to this process (death sometimes comes prematurely, and youth sometimes extends inordinately), these typical phases present the opportunity to anticipate the future of most products. This understanding helps make up a firm’s long-run strategic plan with profitable pricing as the bottom line measure of that plan’s success. As a new product evolves through four phases—development, growth, maturity, and decline—one’s pricing strategy and tactics must vary if they are to remain appropriate.
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