Confessions of the Pricing Man: How Price Affects Everything
Price has another big advantage over marketing instruments such as advertising or sales . Price changes usually can be implemented very quickly. In contrast, it can take months or years to develop or change a product. Advertising campaigns and budgets also require substantial time to implement and even longer to show their full effects.
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
In most cases, again, the primary motivation is the desire to protect existing volume levels and keep employee utilization at levels which do not require furloughs or job cuts.
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
This kind of bundling also occurs in the luxury watch market. Dealers occasionally need to buy a bundle which includes models that are hard to resell. These models often end up in gray-market channels, where original watches get sold at steep discounts. This kind of price erosion is toxic for luxury goods. A customer who has paid $25,000 for a watc
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“My net profit margin is about 6 %,” he said. “If you pay me immediately, that will obviously help my cash flow . But if I give you that 3 % discount , I’ll need to hire twice as many people and do twice as much work to make the same amount of money. That’s why I can’t agree to your offer.”
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
Neuropsychologists have confirmed that the further to the right a digit is, the less influence it has on price perception . According to this hypothesis, customers underestimate prices which lie just under round numbers.
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
Thesis 1: Flat rates mean that the vast majority of light users subsidize a small minority of heavy users. Thesis 2: Flat rates lead with a high probability to lower revenue and profits. From an economic standpoint, flat rate s make no sense.
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
Car manufacturers offer a whole list of optional accessories at additional prices. For the individual customer, putting together one’s own package of options can be a tiresome chore. It can also be a bit of a shock, once the customer tallies up the separate prices for each option and looks at the grand total. This can be a strain for the manufactur
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Multi-person pricing means setting a price for groups of people. The total price will vary by the number of people. Travel agents make offers which allow partners or children to travel at reduced prices or for free. Airlines sometimes will let a second guest or a partner fly at half-price or free. Some restaurants will charge half-price for a dish
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“Setting our prices is easy,” a marketing director at a safety products company once told me. “We just look at what the premium supplier in our market does, and come in 10 % below them.”
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
A customer loyalty concept: to turn the first-time buyers into repeat customers, who have the highest lifetime value.