3.3.4—Pricing methods

Pricing may be based on cost-plus, customer value, demand, competition, penetration, skimming or other objectives. The method should reflect the target segment, costs, elasticity, positioning and business aim.

A higher price can signal quality or recover development costs but reduce volume; a low introductory price can build adoption but is difficult to raise if customers anchor on it.

A new streaming service may use penetration pricing to build a subscriber base, while a patented specialist device may use skimming to recover high development costs.

Price is not the same as value, and a method that increases revenue can still reduce profit or damage the brand.