As others see the technical promise being fulfilled, it simply becomes a substitution pricing decision. Customers prefer the new technology when its price becomes enough lower.

As others see the technical promise being fulfilled, it simply becomes a substitution pricing decision. Customers prefer the new technology when its price becomes enough lower.

A good example of this can be seen in the transitions from one generation of microprocessors to the next. When brand MBT Kimondo Shoes new, the faster chip will often sell for as much as $200 while the chip that is two generations old may have dropped to $30. Yet the old chip also used to sell for $200 -- just about three years before.

Most new technologies are about as price elastic as the old technologies that they replace. But occasionally, a new one comes along that is more price elastic. Then, pricing becomes helpful for controlling the pace of market development.

If prices are kept too high, the market growth declines. If prices are too low, the market explodes, demand cannot be fulfilled, and competitors enter by the dozens. Market share is dramatically lost under such conditions by the current suppliers.

On the other hand, by controlling the rate of price change along with one's own capacity, a far-sighted competitor may be able to seize vast quantities of market share. Although product innovation is clearly part MBT Changa Birch, of its success, Nokia appears to have used this pricing approach in part to manage the demand for its products and its rapidly increasing market share in digital cellular handsets during the 1990s.

Be sure you always know what value you are delivering and how your pricing will affect consumption of a new technology. You will probably have to be fast on your feet with those prices. At a low-enough price, that Xerox network would have stayed with us despite its water problems. How might the world have turned out differently if the price had been a lot lower and the reliability a lot higher?