
Confessions of the Pricing Man: How Price Affects Everything

“he kept pushing it. And now those who use it buy it at a huge price—can’t live without it. When their costs go up a bit, they put the prices up, and no one cancels.”12 Wouldn’t each company love to have such pricing power?
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
Overcapacity is typical as a market enters its mature phase, as companies overestimate growth potential, and also typical for a market’s decline phase, which companies often do not anticipate. Even emerging markets can get to a state of excess capacity relatively quickly.
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
GM borrowed customers from its future sales and sold those people cars at deep discounts.
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
Prospect theory tells us that it is harder for us to part with cash than to pay via credit card, because the negative utility from a cash payment is greater. If you want to rein in your spending and resist the temptation to buy things, trying to pay in cash as much as possible will better help you achieve that goal.
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
“The perception of prices is no different than the perception of other stimuli,”
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
“value to customer.” The price a customer is willing to pay, and therefore the price a company can achieve, is always a reflection of the perceived value of the product or service in the customer’s eyes. If the customer perceives a higher value, his or her willingness to pay rises. The converse is equally true: if the customer perceives a lower val
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“One thing is clear to us: we are not going to pump the market full of cars when there is no demand for them. We always want to produce one car less than the market demands.”
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
“No one can make any money in our business. Every single company has too much capacity. Every time a project comes up for bid, someone needs it desperately and offers suicidal prices. Sometimes it’s us, sometimes it’s a competitor . Even though four suppliers make up 80 % of the global market in our business, no one makes any money.”
Hermann Simon • Confessions of the Pricing Man: How Price Affects Everything
They began with that strategy from day one: All successful low-price companies focused on low prices and high volumes from the very beginning. In many cases, they created radically new business model