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product. But...
Long term, this comes at the cost of establishing a powerful position in the
market by dominating market share (i.e., percentage of the customers). So
don’t stick with this strategy forever.
High prices tend to attract competitors. They see your big, fat profit margins.
They know they can offer a similar product, at a much lower price than you are
doing, and still take home a fair penny.
High price tactics are also known as “selling off market share.” You gain
income from those high profit margins, in exchange for having a smaller and
smaller percentage of the market buying your product.
There are other valid reasons for top pricing, besides “pioneer pricing.” For
example...
Luxury pricing You make a top quality product, among the very best of its
kind on the market. You are able to create a certain “luxury cachet,” building a
high perceived value ( more on this below in The Psychology of
Pricing ). You accept smaller unit-sales in return for higher margin. To thrive
long-term, of course, you must continue to offer a “best of breed” product and
maintain the luxury image.
Pricing a service If you offer professional services, you may find it
preferable to cater to a small number of high-paying clients. Of course, you
have to be able to “walk the walk.” A diametrically opposite strategy for your
same service would be to offer a “cookie-cutter” service to “the mass market” at
a much lower price. ( More on services below . )
Offline example -- Apple sold the Macintosh computer (with its unique-at-thetime,
user-friendly graphic interface) for years, at prices that were $1,000-
$1,500 above that of the PC clones. That was successful for a while, especially
while the competition was pre-Windows 95. In the long run, though, their