Team Post (1 of 2): New Price Strategy At P&G?

As a Crest SpinBrush owner, I was surprised to read about my new electric toothbrush in Chapter 10* (Pricing Products: Pricing Considerations and Approaches 304) a couple of weeks ago. What is most interesting is the fact that I initially purchased the product because of its extremely low price when compared to some of the other competing brands.

While the book discussed how P&G used target costing to set the ideal selling price (Pg. 311*), I recently learned that this was a departure from P&G’s traditional pricing strategy. In Robert Berner’s BusinessWeek article, he pointed out that P&G usually prices new products higher to recover the cost of development. Recently, however, competitors have been able to introduce new products quicker which has taken the advantage away from P&G sooner.

Because SpinBrush was designed to be sold for no more than $5.00 and the designers of the brush were leading the product team, they pushed to sell the SpinBrush at the price they initially conceived and ultimately they prevailed. It seems obvious that P&G used market-penetration pricing (Pg. 333*) when the price for SpinBrush was established. With more than $200 million in global sales for the 2001 fiscal year, it would appear that this deviation paid off well for them.

*Principles of Marketing, Kotler & Armstrong, 11th Edition