The Wall Street Journal posted several excellent articles (including links to some MIT Sloan articles) on pricing yesterday. I thought it might be helpful to provide the links.
- Raise Your Prices! – Face it: Most companies can’t compete on price. And the good news is they don’t have to
- Seven Mistakes of Poor Pricers
- The Myth of Commoditization – Executives, entrepreneurs and investors are too ready to believe that commodity is destiny. The result is a dulling of strategic focus and a narrowing of the business mind.
- Why the Highest Price Isn’t the Best Price – How to practice value-based pricing that boosts profits and promotes better relationships with customers.
In pricing guru Reed Holden’s latest newsletter and blog post, he drives home the point that while IT buyers tend to look like are buying on price they really are not. They just use low price providers to drive down the prices of others.
The way to call them on this is to offer options, including a bare bones option. Once the prospect reject the idea of the lowest price, they are no longer a price buyer. We need to call them on this.
Also, IT providers need to lead with a strategy of distinguishing themselves as knowledge firms, not service firms. This means positioning themselves more like insurance companies do. With insurance (healthcare excepted, but do not get me started), we pay for things we do not want. With IT, we do not want problems.
I am so opposed to billing by the time unit, that I refuse to pay the $0.50 for those two minute mechanical rides to nowhere near shopping centers.
In this video, you see how my kids completely enjoy themselves (effectiveness) even though the ride never moves at all (not efficient), plus I don’t pay anything!
As an added bonus they make their own sounds and it qualifies as creative play!
Cecil Graham What is a cynic? Lord Darlington A man who knows the price of everything and the value of nothing. Cecil Graham And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything, and doesn’t know the market price of any single thing.
It is obvious, to me anyway, that as pricers we are striving for the midpoint between the two. However, I am curious as to your thoughts on this.
or Why my lovely wife does not want me to go shopping with her.
At a recent trip to the mall, the whole family wondered into an Ann Taylor Loft. Actually, Christine wandered in, I just obediently followed. While she was looking around, I noticed three signs above adjacent racks.
The first offered two tee-shirts for $30 or $19.50 each.
The second, right next to it offered two tee-shirts for $30, but no mention of individual price and the third rack had individual tee-shirts for $15 each.
Any thoughts as to why? I have an idea, but will hold off posting it for a few days.
You should have seen her face when I was taking these pictures. The salespeople at the store were a little perplexed as well.
Hat tip to my buddy Jason for sending this along to me.
This graph originally posted on ReflectionOf.me blog and reposted on The Consumerist and others, once again demonstrates that price is not based on cost. Interestingly enough, most of the comments are railing against Hewlett Packard. Give me a break! You basically get the printer for free and HP recovers the money by charging I higher price for the ink.
One a side note, this graph also shows why it will so hard to get the developing world to shift away from fossil fuels with crude oil being less expensive than bottled water.
Over the next few weeks I will be posting my thoughts from sessions that I attended at the Information Technology Alliance’s Fall Collaborative (<—I love that word) held in Palm Springs.
In the first session entitled Negotiating: The critical skill for success in a soft economy, Jack Kaine delivered an excellent presentation including some of the following good thoughts:
- Bargaining is about who is right; negotiation is about what is right.
- Win-win is about mutual gain, which is not to be confused with equal gain.
- Bargaining presupposes a zero-sum game like poker; negotiation presupposes the ability to grow the pot beyond what is at the table.
- The sooner you quote price the lower it will be and be proud of your pricing!
- When you lower your price unilaterally you are saying you are a commodity.
- Do not bargain with yourself! Discounting indicates a lack of self-esteem.
- Saying something is "fair and reasonable" is a subtle way of calling the other party, "unfair and unreasonable."
This snippet from Rory Sutherland’s TEDtalk demonstrates that sometimes creating more perceived value of an already existing product is incredibly powerful and profitable.
If clearly shows that value is subjective (in the eyes of the customer) and not based on costs.
Dan Ariely authored one of the best books I read in 2009 entitled Predictably Irrational. In this brief clip from his TEDtalk he demonstrates the powerful effect of options pricing. Ironically, the subject is The Economist magazine and they completely missed the opportunity to display their pricing prowess. They blew it! Big time!