Reciprocally derived demand and pricing strategy for mature industrial products

Abstract

Purpose

This paper aims to determine the effects of a strategy of annual price increases for mature industrial, razors/blades products. Little prior research has looked at pricing strategy for mature industrial products and no prior research has looked at mature industrial products of capital goods (razors) and linked supplies (blades).

Design/methodology/approach

The authors surveyed a major industrial manufacturer's 3,000‐strong customer base to determine the price elasticity effects of annual price increases over a four‐year time span.

Findings

The authors found that though price elasticity appeared limited in the early years, it increased exponentially over the years.

Research limitations/implications

The authors used a single company's 3,000 strong customer base for in‐depth analysis of concepts, with attendant limitations. Specifically, the population of respondents, though large, represents the customer base of a single company. The findings of this exploratory study must be replicated with more diverse populations before they can be generalized.

Practical implications

The study's practical implications lie in its contribution to understanding pricing strategy in mature industrial markets. Researchers and managers frequently treat these markets as extensions of their emerging or growing product life cycle stages. However, mature product markets exhibit different product‐market characteristics.

Originality/value

The article's originality and value stems from its addressing an increasingly important issue. The lack of research covering mature industrial products' pricing strategy, coupled with the increasing number of products that fall within this life cycle, make the product category increasingly central to many companies' profitability.

Citation

Haley, G. and Goldberg, S. (2008), "Reciprocally derived demand and pricing strategy for mature industrial products", Management Decision, Vol. 46 No. 7, pp. 1066-1080. https://doi.org/10.1108/00251740810890221