Chapter 11

Higher Return: Introductory Pricing Strategies

Let us always meet each other with a smile, for the smile is the beginning of love.

—MOTHER TERESA

Now that your company has a product or service ready for market, how can you use price to attract the attention of buyers and propel them to buy your product?

Two factors determine the success of an introductory pricing plan: knowledge and timing. By its nature, a new product is unfamiliar to potential buyers, and the burden of familiarization is on the seller. Precisely how your company should shape its introductory price will vary with each product, but while the application varies, the framework for success does not.

The good news is that the seller begins with an advantage. Sellers should know more about the product (or service) and its use than first-time buyers, so the seller should be able to shape the introductory pricing to the seller’s advantage. Yet many persist in using introductory price schemes that ignore the advantage. Too many companies use the two-step “discounted trial followed by full price” approach. That begins to reflect the evolution of product knowledge and power, but it is a very crude approximation. What is a better fit?