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Pricing Policies for New Products (HBR Classic)
New products should be priced and repriced over their life cycle to fit the changing competitive environment. In the pioneer stage manufacturers must estimate demand, decide on market targets, design promotional strategies, and choose distribution channels. Manufacturers must decide between a high initial price which takes advantage of inelastic demand and helps bear the burden of financing and a low initial price which can penetrate mass markets early and raise entry barriers to competitors. Manufacturers must recognize when a product is entering its mature stage so that prices can be reduced promptly to forestall the entry of private-label competitors.