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Destructive Lifecycle Pricing Strategies

Our subscriber training seminars often put us in the precarious position of having to be the bearers of bad news. And our latest session, Lifecycle Pricing in B2B proved to be yet another example of this dynamic.

On the one hand, it’s our mission to provide the research and information that Journal subscribers are looking for—and lifecycle pricing is something we get asked about quite a bit. But on the other hand, much of the conventional wisdom around lifecycle pricing turned out to be so fundamentally flawed that we felt obliged to call BS on it.

For example, much of the product management literature and training around lifecycle pricing is littered with fairly matter-of-fact references to two pricing strategies that have no place in modern B2B pricing:

  • Penetration pricing is often presented as a perfectly acceptable pricing strategy for “securing more volume” in the introductory stage of the lifecycle and “creating more momentum” heading into the growth stage.
  • And competitive price-matching is a strategy that is often highlighted as being a good way to “maintain market share while maximizing profitability” in the more mature and stable stages of the product lifecycle.

So…we really had no choice…we had to call BS on the conventional wisdom.

After all, these pricing strategies aren’t merely “suboptimal” or weak. In many B2B environments, these pricing strategies can destroy profitability and spell doom for otherwise-viable products before they even have a chance to succeed.

Of course, we didn’t spend the entire training session just tearing down the conventional wisdom around lifecycle pricing (even though we could have). We also explained what leading pricing teams were doing instead—where they focus their attention, the value-based strategies they leverage, the segmentation they instill early on, and more.

It’s hard to go against the conventional wisdom. But it becomes a little easier when you recognize that conventional wisdom is often just a bad idea that others have come to accept.

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