Pricing Theory And Techniques For Perishable High-Tech Product

Advancement of information science and technology has made the high-tech sector a driving force behind economic growth and global competition. While the industry brings tremendous opportunities to high-tech firms, it also creates unprecedented competition. Because of rapid development of technology and constant innovations, clife-cycles of high-tech products are significantly shortened. To some extent these products have become perishable; i.e., they lose partial or all values when new generations emerge in the market. For high-tech firms, if they do not manage and price their products properly, they will face the risk of having obsolete inventories, not recovering the R&D cost, and even going out of business.It is well known that the product life cycle consists of four phases: introduction, growth, maturity and decline. Marketing and pricing strategies for traditional products during each phase have also been extensively studied. However, given the perishability of high-tech products and their distinct features in each phase, the traditional approach cannot be simply applied. This research redefines the life cycle of the perishable high-tech products using New Moore's Law. It divides the cycle into six phases: early market, chasm, bowling alley, tornado, main street, and assimilation. Through analyzing the characteristic of each phase, the author identifies the key elements concerning product price and develops different price strategies in these periods to meet company's revenue and profit goals. A quantitative model is proposed for pricing high-tech products in the competitive market. The model uses the concept of Huff's retail model but restructures the framework and parameters to fit the feature of high-tech products. Numerical experiments are presented to illustrate applicability of the model.Pricing for perishable high-tech product in decline period is a key and difficult point for high-tech product management. The research for pricing from introduction period to maturity period is very rich, but that for decline period is very few. On the other hand, as the decline period is always for short and is the last period before exiting from the market, the decision-makers are easy to ignore the management over this period. However, the right pricing for decline period is beneficial for enterprises to maximize the product value and improve the asset return rate hence enhance the firms' profits. There, pricing over decline period is an urgent problem to be solved.The study conducted in this dissertation helps high-tech firms, retailers, and other practitioners develop more effective price strategy when perishable high-tech products are competing with substitutable lines and generations. This is particularly relevant in view of the fact that firms strive to increase revenues and profit in order to survive in today's competitive business environment.