A recent LinkedIn question resonated with me—”Why don’t people like to talk about pricing UPFRONT?” Why indeed?
Have you ever been frustrated when trying to make a purchase decision because you can’t get pricing information from coy salespeople or cryptic web sites? In my opinion, (more…)
by Justin Grensing, Esq., MBA
Where to price products and services is a key part of any business’s marketing and finance strategies. Economic theory includes multiple strategies for pricing, depending on broader business goals. For example, a company looking to maximize profit will try to set its marginal revenue—the revenue received from one additional unit of sale—equal to marginal cost (the cost associated with one additional unit of sale). A company trying to maximize sales will focus on average costs and revenue. The point where they meet is the sales maximizing point.
Of course, these are economic theories, and how these strategies play out in the real world is anything but certain.
by Justin Grensing, Esq., MBA
At first glance, it might seem like a ridiculous strategy to price a product below its cost. Wouldn’t you just be losing money? While this is true, many companies do just that, and they do lose money. On that specific offering. This is part of a strategy known as loss leader pricing. As defined by Inc., “loss leader pricing is an aggressive pricing strategy in which a store sells selected goods below cost in order to attract customers who will, according to the loss leader philosophy, make up for the losses on highlighted products with additional purchases of profitable goods.”
A great example of a loss leader is razors. (more…)
A few years ago I was lamenting my cable bill with a friend who told me she had recently told her cable company she wanted to cancel her service because, based on how little she watched TV, she couldn’t justify the monthly fee. Rather than lose a customer, the cable company offered a steep discount. I’ve heard of others who have used the same strategy successfully.
I recently came across a Harvard Business Review piece called “The Downside of Discounts,” which reminded me of these cable company discounts. (more…)
Pricing is a complex issue for any organization or business and one of the key considerations that organizations must make is whether to discount what they have to offer. Even the “big guys” sometimes get it wrong. Consider J.C. Penney’s recent missteps with their move away from discounts under short-lived CEO Ron Johnson. Pricing is one of (more…)
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