Successful innovators price according to what the customer pays for.
Under the other entrepreneurial strategies, the innovator has to come up with an innovative product or service; here the strategy itself is the innovation. The innovative strategy converts an existing product or service into something new by changing its utility, its value, and its economic characteristics. There is new economic value and new customers, but no new product or service. Often the most successful way to change the economic characteristics of a product or service is to change its pricing. In the end the producer gets the least the same amount of money, if not a good deal more. But the way pricing is structured reflects the customer’s reality rather than the reality of the producer.
Here is an example. The Internet was designed as an information network. And most providers charged for access to it, such as for hosting an e-mail address. But Yahoo and other companies give away Internet access. It gets paid for by advertisers whose ads the customers have to see when they go online. Yahoo asked: “Who is the customer?” Its answer: “It’s a supplier who wants access to a potential customer.” This changed the characteristics of the industry. It gave the Internet a new dimension.
ACTION POINT: Determine what your customers really buy. Serve them in a way that better meets their needs and also creates enhanced economic results for your organization.
Innovation and Entrepreneurship
Entrepreneurial Strategies (Corpedia Online Program)
* Source: The Daily Drucker by Peter F. Drucker