Launch high, or launch cheap?
Two opposite ways to price something new, and both have built giants.
Marketing
Price skimming
Start high, come down slowly.
Launch at a high price for the eager buyers, then lower it step by step for everyone else. New phones follow this almost every year.
- Right when
- When some buyers badly want it first and will pay for that, and rivals can’t copy it quickly.
- For example
- A new phone launches at ₹80,000 for the people who must have it on day one. A year later it costs far less, and reaches the buyers who were waiting.
- Wrong when
- When a cheaper rival arrives before you’ve come down.
Marketing
Penetration pricing
Start cheap, win the crowd.
Launch cheap to win customers fast, then raise prices once they’ve settled in. Jio’s free data in 2016 is India’s famous example.
- Right when
- When the product gets better as more people use it, or customers rarely leave once they’ve settled in.
- For example
- Jio launched in 2016 with free calls and data, and passed 100 million users in under six months. Once numbers and habits had moved, it could start charging.
- Wrong when
- When customers came only for the low price and leave the day it rises.
What decides it
Will the first buyers pay to be first, or will they stay once it costs more?
Skimming works when being early is worth something to buyers. Penetration works when being big is worth something to you, through network effects or switching costs. Ask which one your product has.
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