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Pricing and marketing


#1

Now that the discussion of pricing seems to have calmed down a
bit i would like to relate a couple of lessons i learned in
college when i was studying for my BBA in Marketing.

  1. Pricing can be structured by cost plus profit at any level in
    the chain of distribution.

  2. pricing can be structured by the principal of “all the
    traffic will bear”

both of these are standard pricing policies used in the good old
world of commerce. There are no moral implications to either they
are only business.

now for our stories. once upon a time there was a distillery
that produced a very fine Scotch whiskey. They brought it to the
market place priced to compete with what they viewed as an
inferior whiskey Cutty Sark. a middle of the road priced whiskey.
they were an abysmal failure. so what to do? simple. They removed
the whiskey from the market place and reintroduced it at twice
the price. Ta Da success. Chevas Regal becomes the benchmark for
gooooood scotch.

Story two takes place in the 1980’s and a foreing car company
decides that the world market is just not paying enough for their
zoomie little cars. They are fast and pretty and you are just not
paying enough. so they raise the price by $10,000.00. Ta Da
success. sales do not drop and profits soar and you are now
paying more for exactally the same no added value Porshe.

The moral of our stories is very simple. people will pay for
what they want or what they perceive they need and they will pay
what THEY perceive a fair price should be and price is relative
to perception.

so next time we are cruising in our Porshe sucking down the old
Chevas (and no i am not advocating drinking and driving) remember
what you paid for both and how much you charged for that last one
of a kind. once again we go through the doors of perception
closing them for the night and turning out the light. story time
is over.

Frank


#2

Frank:

I love your stories and I have heard the same kind of thing from
people who sell jewelry and rough at shows. Couldn’t sell it at
$20/ct (they didn’t know what it was, looked at the price and
decided it was sh__ from that) raised it to $50/ct and everyone
thought it was the good stuff and bought it.

I would add, though, that this strategy will probably be more
successful if you look for the high end customers and add a
little high end window dressing. I bought a watch for my
daughter at K-mart tonight (she had lost hers at swiming class
and will doubtless lose another next year (10 y/o)) and we had to
go up front to page a salesgirl to the jewelry booth. You won’t
sell at a high price if this is your approach. If you add some
high class touches and hover correctly, I think that will work
— I am not an expert at that, don’t sell much. I think many of
the list members are refined, discriminating people — I think
they just need to let that side show in expecting higher prices.
Comments?