Confessions of the Pricing Man: How Price Affects Everything

One method is to do thorough research to reduce the information gaps by looking online, reading test reports, or asking friends.

I summarize my insights into price war s very simply: there are smart industries and there are self-destructive industries. What is the difference? The smart ones avoid price wars, and the self-destructive ones get stuck in them. The smart ones are profitable; the self-destructive ones incur losses or destroy profits. The problem is that it only ta

Customers will only pay high prices for a product or service when they receive high value in return. High value, in turn, often requires high costs to produce and in real life, that is often the case: it costs too much to achieve and sustain the level of value needed to support a high price.

“We’re getting out of the junk business, like employee pricing sales that boost market share but destroy residual values. It’s better to sell fewer cars at higher margins than more cars at lower margins. Selling five million vehicles at zero profit isn’t as good a proposition as selling four million vehicles at a profit.”

“We’re getting out of the junk business, like employee pricing sales that boost market share but destroy residual values. It’s better to sell fewer cars at higher margins than more cars at lower margins. Selling five million vehicles at zero profit isn’t as good a proposition as selling four million vehicles at a profit.”

But there is another aspect of luxury goods that poses a problem on the cost side: their buyers expect not only products of extraordinary quality, but also service at the same level.

This approach works even better when you follow up your quantitative questions with two qualitative ones: Why? And what happens next? The “why?” question challenges the respondents to explain their estimates, particularly what happens to the demand if you cut prices and what happens if you raise them. The “what happens next?” question is another wa

higher value to customer which supports higher prices.

answers. First, the high prices create an opportunity for price differentiation . Not all buyers receive the same discount. One role of the seller is to offer the smallest possible discount without losing the customer.