The Super Effective Pricing Strategy You May Be Overlooking | Inc.com

There was a time when pricing was almost a consequence of other decisions made by a company. Companies used to figure out their cost and tack on a few pennies. Today, companies reverse engineer their solutions based on a price point.

In his book Priceless: The Myth of Fair Value, MIT professor William Poundstone shared a discovery that rocked the consumer goods industry and set a standard for how companies think about price.

He famously offered consumers various choices for beer. When presented with two choices, people chose the more expensive option 80 percent of the time. When a third, pricier option was added, they selected the middle-priced beer 85 percent of the time.

So what does this have to do with the cost of tea in China? As our economy migrates to end-to-end solutions and service bundling, marketers are rethinking how they price products. Price does not only impact revenue and profit; it shapes buyers’ perceptions of a brand.

While many industries are changing seemingly overnight, a stodgy old pricing theory is still relevant. “Good-better-best” is proliferating online. Providing options implies we respect our customers enough to give them choices. The shrewdest marketers have figured out machine learning will offer opportunities to influence buying decisions in ways they never could before.

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The Super Effective Pricing Strategy You May Be Overlooking | Inc.com.