Dow Corning launched a Web-based discount sales channel for some of its specialty chemicals. Many in the industry saw the dual pricing system as suicidal. But a Harvard University B-School Strategy and Innovation article concludes the opposite was true:
A two-tiered pricing system, they argued, would undermine Dow Corning's core business; purchasers of premium-priced products—available for a lower price through the Xiameter channel—would think they were being overcharged and would clamor for a better deal. To date, however, Xiameter has been a clear winner: It paid back its original investment to the parent company in just three months.