OnDemand WTP Pricing Research

Pricer’s Points: Five Myths About Price and Discounting | Mark Boundy

I can’t think of any concepts more misunderstood than price, pricing, and discounting. An alarming number of businesses price poorly, losing out on profits as a result. We even teach falsehoods about price at the college level. Let’s discuss five myths about pricing, and its Mr. Hyde alter-ego, discounting.

I usually start breathing fire on this topic, so buckle up. If this starts feeling a little too close to home, don’t get mad. Get better.

Myth #1: Price should be related to your costs.

Price should relate to customer value, period. Cost-plus pricing (your costs, plus some margin should equal price) is only useful to set a minimum, or a walkaway, not your actual price.

Take this one question quiz: Your customer wants a price that is below your costs. You tell him so. Question: is the average customer more likely to:

  • A: Erupt with a sympathetic “Oh, in that case, tell me what you want me to pay!”
  • B: Let you know, politely or otherwise, that your costs are not his/her problem, and (gently but?) firmly give you some version of “take it or leave it”.

So, if your costs are none of the customer’s business at the low end– and you know it – why should your costs be any of your customer’s business at the high end?

Customers only pay any price (high or low) voluntarily – at least in the long run. The reason they do is because they find sufficient value in the outcomes your offer delivers. Figure out your value, quantify it, and then set your price accordingly.

Read complete article here:

Five Myths About Price and Discounting | Mark Boundy.