Actively pricing products across their life cycle is increasingly important, particularly in innovation-intensive industries. Failing to do so may forego potential profits or even destroy value.

Transaction pricing is the key to surviving the current downturn-and to flourishing when conditions improve.

Pricing, the intersection at which untold numbers of buyers and sellers meet every day, lies at the core of any business. Yet it remains misunderstood and poorly managed, according to The Price Advantage, a new book by three consultants at McKinsey & Co. Even executives at successful companies may not fully appreciate how small changes in price can lead to large changes in profitability. Wharton marketing professor David J. Reibstein spoke recently with one of the authors about the themes in their book.

Companies habitually charge less than they could for new offerings. It's a terrible habit.

Two widely disparate approaches to pricing have dominated the sale of goods and services on the Internet.

Editor's Note: although written in 2001 (a lifetime ago in the "Internet age"), much of the suggestions are of long-lasting value...