Alternatives matter. Customers who believe your $19 price is fair… won’t pay it if they know about equivalent (in THEIR minds) alternatives for $12. Source: The Tao of Pricing.
Price “reasonableness” is in the mind of the buyer. Examples: A 10% better soap might not be worth even a penny more to buyers. A 10% better wrinkle cream might be worth 500% more. Source: The Tao of Pricing.
Asking buyers what they’re willing to pay is like asking a fox to guard your henhouse. Why, then, trust survey responses when setting your prices? Source: The Tao of Pricing.
If an increase in your costs necessitates an increase in your price… even a minor modification to your product can divert attention from the price increase. Source: The Tao of Pricing.
Cost-plus pricing (adding a fixed percentage for profit on top of your costs) is the worst pricing strategy around. And it’s used by most companies(!) But… there are two good uses for it: Use it when all your products or services are completely customized. Thus if you build new houses to customer specs — thenContinue reading “Cost-Plus Pricing Strategy – 2 Good Uses”
Cost-plus pricing is where you calculate your costs, then add a percentage to it for profits. It is used by most companies. Cost-plus pricing is required only where you sell customized products/services — where every order is different. For all other products/services — it’s the worst pricing strategy you can use. In fact — youContinue reading “Do you use this terrible pricing strategy?”
If you have excess production capacity for your premium brand product, consider a lower cost version as well. However, make it a separate brand (or manufacture it for a private-label client) instead of cheapening your premium-brand image. Source: The Tao of Pricing.
Adding a higher-priced model (even one that sells poorly) can make your other models more attractive. Some customers (and some companies) wish to avoid the highest priced model. Help them by giving them an even-higher-priced model to avoid. Source: The Tao of Pricing.
A peasant may not remain one. Offering a range of models at different price levels lets consumers develop brand loyalty — before they can afford your best. Example: By ignoring the low ends of their markets, GM and Ford allowed Toyota & Honda to grow strong enough to then challenge them with high-end cars. Source:Continue reading “Rationale for Entry-Level Offerings”
Beware of “loss leaders” that could become just-plain-losses. Example: A cellular service attracted droves of customers for its “evenings free” promotion. But… most of them only placed evening calls. Source: The Tao of Pricing.