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Old-product Pricing

Disciplines > Marketing > Pricing > Old-product Pricing

Description | Example | Discussion | See also

Description

Price older products so customers have to make a clear choice whether to have the latest product, with all its new advantages, or the older, proven model. Be careful to manage pricing around the introduction of new versions so old and new items are clearly distinguished with an appreciated value-pricing balance. Another approach is to discount old products to get rid of stock before introducing the new model.

This also varies with industry. In fashion, for example, older products rapidly lose their value as the latest goods are most desirable. Technology products also date quickly and may suffer from issues of compatibility. Some other items, such as gardening implements, do not age much, if at all, so old-product questions only arise if the market is shifted by significant innovation.

Old-product pricing can include for restored or recycled products, for example those taken in part exchange. In this case, the second-hand aftermarket may be significant, for example for motor vehicles. Particularly when there is a plentiful supply, prices will naturally find their level, especially where the price is more negotiable than buying a new product.

Example

A car manufacturer has a 'sale' shortly before introducing a new model. Customers may well know that this is the case and are just grateful for a car than only recently was more expensive.

A plant nursery reduces the price of flowers that are near to shedding and as newer stock arrives.

A fashion house scraps top level stock rather than pricing it more cheaply. They do, however, let mass-market last-season clothes to be sold through low-price channels, albeit with labels removed.

Discussion

It can be tempting to sell off previous models, but this can be dangerous when it confuses or distracts customers. When there are many of your older products still on sale, it can appear to customers that you are behind the times. Your distributors may also be troubled by this when it reduces their ability to sell higher-priced new goods and when they have stocks of products that become worth less (or even loss-making for them).

Where flooding the market with old stock could damage the brand or new sales, consider scrapping the product. Another option is to remove branding indicators and sell through a side market (this is typically done in fashion, where the labels are cut off and the goods sold via local markets or other no-name retail channels).

See also

Discountable Pricing