New product pricing strategies for network effects products: free products?
by Susanna Winter, Sanna Sundqvist
International Journal of Technology Marketing (IJTMKT), Vol. 5, No. 3, 2010

Abstract: An increasing amount of products introduced today exhibit network effects, i.e., the value of using the product increases as more people adopt it. However, current marketing literature offers little decision-making guidance for managers introducing network effects products. In this paper, we show that the consistency between product characteristics, objectives of product launch, and pricing objectives determines preferable introductory pricing strategies. Contrary to traditional products, the pricing decisions for network effects products are influenced by whether creating a critical mass of users is important for the future success of the product. Additionally, we demonstrate that although penetration pricing can be recommended in some cases, it is not suitable in all situations. Premium prices can be charged depending on the relative importance of intrinsic and extrinsic product value. The results of our study highlight the need to update the theoretical reasoning on launch strategies for network effects products. Implications for managerial practice are discussed and suggestions for further research offered.

Online publication date: Fri, 11-Mar-2011

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Technology Marketing (IJTMKT):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com