Motorola Xoom: Market-Skimming Pricing
Nov 27th, 2011 by ziyansun
I just read a blog criticizing the the pricing strategy that Motorola used on a new product, Xoom, which is positioned as an ipad competitor. (Motorola Will Not Xoom past Apple and iPad http://markrburton.wordpress.com/2011/02/14/motorola-will-not-xoom-past-apple-and-ipad/).
Motorola set the price for Xoom at a point of around $800,which was exactly around the same price the Apple used for its first generation ipad. However, Motorola added few more advanced features which can enable them to outperform ipad to some extend. However, this blogger think this pricing strategy although seems to make sense as Motorola offers more at the same price as its competitor, it failed to predict its competitors move in the recent future, which will have a huge impact on Xoom. The critique indicates that Motorola would definitely drop its price due to any significant changes on iPad later on, thus they shouldn’t be just reacting to it competitor’s change. What Motorola should do is to anticipate it and adopt a more reasonable price on Xoom.
In my opinion, I think the pricing strategy that Motorola used on its new product makes sense in some certain ways. For the pricing strategy on a new product, companies or manufacturers usually adopt two ways. one is called “market-skimming pricing” and another one is called ” market-penetrating pricing”. Obviously, for a high-end electronic product, the market-skimming makes more sense which sets the price at a relatively high price in order to have enough space to cut it down in the near future. Meanwhile, high price at the beginning also generate more profit as there are still a fair amount of customers who are loyalty with Android system.
The current Xoom price is extremely low today which is around $300~$400 according to different versions. However, at least this pricing strategy sets a good base at the beginning and have being adjusting the price position catering to the market needs.