Das Capitolin
07-25-2006, 03:52 PM
This is a very interesting read, and something we should all consider.
Summary:
In the consumer products business, if there is a package of frozen peas from Green Giant that’s priced at $3.99, you’re not likely to see someone else’s same-size package of peas priced at $14.99. But in High Tech, things are different.
The Price Is Right, Or Maybe It's Wrong
Pricing is always an interesting topic, but even more so in the High Tech and Software worlds. In the consumer products business, if there is a package of frozen peas from Green Giant that’s priced at $3.99, you’re not likely to see someone else’s same-size package of peas priced at $14.99. But in High Tech, things are different.
The pace of innovation in the High Tech world leads to pricing that’s all over the map. It’s not unusual for a brand new competitor to come out at a higher price than the current established market leader—if their product is based on market-changing advances in product functionality due to a new technology. This is unheard of in most markets.
Then you have the PC business, where rapid technological advancement over a long period of time has led to continuously lower prices—with great benefit to consumers but squeezing margin (and indeed many competitors) out of the market. Things move fast in High Tech. Sometimes it’s a high initial price to harvest profits while you have a feature advantage, other times aggressive discounting based upon your lower cost structure due to less expensive technology. Whatever the case, you can often count on pricing moves to be dramatic, and to have a profound effect on High Tech market segment in the long-term.
Article: http://www.thetechzone.com/?m=show&id=586
Summary:
In the consumer products business, if there is a package of frozen peas from Green Giant that’s priced at $3.99, you’re not likely to see someone else’s same-size package of peas priced at $14.99. But in High Tech, things are different.
The Price Is Right, Or Maybe It's Wrong
Pricing is always an interesting topic, but even more so in the High Tech and Software worlds. In the consumer products business, if there is a package of frozen peas from Green Giant that’s priced at $3.99, you’re not likely to see someone else’s same-size package of peas priced at $14.99. But in High Tech, things are different.
The pace of innovation in the High Tech world leads to pricing that’s all over the map. It’s not unusual for a brand new competitor to come out at a higher price than the current established market leader—if their product is based on market-changing advances in product functionality due to a new technology. This is unheard of in most markets.
Then you have the PC business, where rapid technological advancement over a long period of time has led to continuously lower prices—with great benefit to consumers but squeezing margin (and indeed many competitors) out of the market. Things move fast in High Tech. Sometimes it’s a high initial price to harvest profits while you have a feature advantage, other times aggressive discounting based upon your lower cost structure due to less expensive technology. Whatever the case, you can often count on pricing moves to be dramatic, and to have a profound effect on High Tech market segment in the long-term.
Article: http://www.thetechzone.com/?m=show&id=586