The Price Corridor of the Mass

The Price Corridor of the Target Mass developed by W. Chan Kim and Renée Mauborgne is a tool managers can use to determine the right price to unlock the mass of target buyers. When setting a strategic price for a product or service, managers must evaluate the trade-offs that buyers consider when making their purchasing decision, as well as the level of legal and resource protection that will block other companies from imitating their offering.

© Chan Kim & Renée Mauborgne. All rights reserved.

Step One:
Identify the price corridor of the mass.
Three alternative product/service types:

Same Form Different Form, Same Function Different Form and Function, Same Objective
Step Two:
Specify a price level within the price corridor.
Size of circle is proportional to number
of buyers that product/service attracts

© Chan Kim & Renée Mauborgne. All rights reserved.

To set the strategic price, first identify the price corridor of the target mass, that is, the price range that attracts the mass of target buyers. Key to determining the strategic price is for managers to understand the price sensitivities of buyers who will be comparing the new offering with a host of very different-looking products and services offered outside the group of traditional competitors. For example, buyers can choose between several movie theaters, but they can also decide to go to restaurants and bars. Managers should consider two categories of products/services that are beyond an industry’s boundaries in identifying the price corridor of the mass: products and services that take different forms but perform the same function, and products and services that have different forms and functions but serve the same objective.

Next, determine how high or low the strategic price should be set within the corridor without inviting imitation from competition. A company must consider two sets of factors: the level of legal and resource protection the new offering has to block imitation, and secondly the degree to which the company owns some exclusive asset or core capability that can also block imitation. The higher the level of protection against imitation, the higher the strategic price can be within the price range that still attracts the mass of target buyers. For example, if the product or service has strong patents and hard-to-imitate service capabilities one can use upper-boundary strategic pricing to attract the mass of buyers. On the other hand, if a manager is uncertain about their patent and asset protection they should consider pricing somewhere in the middle to lower end of the corridor.

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Blue Ocean Strategy & Shift Tools

W. Chan Kim and Renée Mauborgne created a comprehensive set of analytic tools and frameworks to create blue oceans of new market space. In their New York Times bestselling book, Blue Ocean Shift (September 2017), Kim and Mauborgne share how to put these practical market-creating tools into practice to move from red to blue oceans and to do so in a way that people own and drive the process.

Brimming with battle-tested lessons and the stories of organizations from around the world that put their ideas into practice, Kim and Mauborgne highlight what works, what doesn’t, the potential pitfalls along the way and how to avoid them to achieve the best results in your organization. Get your copy of Blue Ocean Shift now, and get all these answers plus so much more including exercise templates you can use to apply the tools in your organization. Learn, apply and execute successful blue ocean shifts using the fully interactive and guided Blue Ocean Studio.

All analytic tools © Chan Kim & Renée Mauborgne. All rights reserved.

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