Can Prices for a Declining Product be Raised? When?

You might not think it is logical that prices for a declining product climb, rather than drop. But it does happen. Consider prices for public switched network voice lines.

“Harvesting” is a time-tested business strategy for products in a declining phase of their product lifecycle, and typically involves a number of tactics that seek to reduce costs and investment in those products. 

What might seem odd is the possibility that prices for a product with declining demand actually can be raised. Among the best examples in the connectivity business is prices for traditional phone lines. Despite declining demand, prices actually have climbed since about 2002, in the U.S. market, for example. 

Year	Price without taxes and fees	Price with taxes and fees	Inflation-adjusted price (2023 dollars)
2001	$21.47	$25.75	$36.52
2002	$22.27	$26.69	$37.96
2003	$23.11	$27.67	$39.47
2004	$23.98	$28.68	$40.99
2005	$24.88	$29.73	$42.57
2006	$25.81	$30.82	$44.21
2007	$26.77	$31.93	$45.91
2008	$27.75	$33.09	$47.67
2009	$28.76	$34.28	$49.49
2010	$29.80	$35.53	$51.37
2011	$30.86	$36.83	$53.31
2012	$31.95	$38.17	$55.31
2013	$33.06	$39.57	$57.37
2014	$34.19	$40.99	$59.49
2015	$35.35	$42.46	$61.67
2016	$36.53	$43.96	$63.91
2017	$37.74	$45.50	$66.21
2018	$38.97	$47.06	$68.57
2019	$40.22	$48.66	$71.00
2020	$41.49	$50.29	$73.49
2021	$42.78	$51.96	$76.04
2022	$44.09	$53.66	$78.65
2023	$45.42	$55.39	$81.32

Some of the price increase might be attributed to reduced scale, as fixed costs must be amortized over a shrinking customer base, leading to higher per-account costs. And though higher prices lead to reduced demand, putting pressure on ability to raise prices, it also is true that customers who do not value the service are the first to leave.

The remaining customers often have good reasons for retaining service, especially business customers. 

Some would make similar observations about the cost of traditional home security systems or linear TV subscriptions.

In many cases, though, even when retail prices drop or remain flat, the business model includes other measures to reduce the costs of providing the product. The harvesting strategy might often feature:

• Reducing marketing and advertising spending

• Cutting back on product development and innovation

• Reducing customer service and support

• Eliminating unprofitable channels or markets.

All of those measures might help to preserve profits when sales volume and customer demand for a mature product is falling, and additional investment is not deemed likely to support renewed demand growth.