“Ultimately, the thing that customers care about is how a new product will impact their bottom line.” So states the March issue of “The Pricing Advisor,” the monthly newsletter of the Professional Pricing Society.
The newsletter’s cover story was about the Iridium satellite phone, a marketplace failure despite impressive capabilities.
“Using a network of satellites in geosynchronous orbit around the earth,” the newsletter states, “Iridium provided the user with instant phone access at virtually any point on the earth – even in areas with no conventional cell phone coverage.”
How could a phone with that kind of capability fail? Well, it weighed several pounds and was the size of a large brick (because of the heavy batteries it required).
“This one feature made Iridium an unattractive alternative for the mass cell phone market and limited it usefulness to remote industrial applications such as oil platforms,” according to “The Pricing Advisor.”
Then there was the $3,000 plus price tag that was necessary in order for the company to cover its $5 billion investment in satellites.
Iridium is a classic example, the newsletter states, of a new product that failed because its value proposition was poorly aligned with the needs of the marketplace.
Tomorrow in Retail Strategies, we’ll take another look at pricing, using the Iridium example.