For most people, throughout most of human existence, scarcity was paramount.** Now we live in an age of not just abundance, but superabundance. The agricultural revolution created abundance– not by today’s standards– in food. The industrial revolution created abundance in manufactured goods. The information revolution not only created an abundance of communication and information, it [...]
We mentioned in a previous post that Microsoft is in the grips of a pricing dilemma. Changing paradigms have weakened Microsoft’s dominant position in operating systems and office productivity programs. Businesses and affluent consumers no longer upgrade regularly. What they have now is good enough. Developing markets that don’t need to maintain backwards compatibility with [...]
If a tree falls in the woods and no one hears it, does it make a sound? If your offering has value that customers don’t perceive, can you charge for it? Price is limited by perceived differential value. So if you are busy creating value through market research, design, R&D, better customer service, or some [...]
When commodity prices surged and governments around the world pumped hundreds of billions of dollars into markets, crippling inflation was a major risk. However, demand is so soft that the Consumer Price Index (CPI) fell a record 1.0% in October. With the critical holiday buying season coming up, a lot of retailers aren’t even pretending [...]
Customers hate price increases. So many companies keep the price the same, but reduce the amount of product sold. I recently came across an example of this when my wife came from the grocery store with a big container of Tropicana Orange Juice touting a “new, easy-pour” design. As a pricing person, my first thought [...]
The US Producer Price Index rose 9.8% for finished goods for the 12 month period ending in July, the largest jump in 27 years. Businesses are stuck between the rock of rising costs and the hard place of weakening spending. Passing along price increases could further dampen demand, while not passing along price increases could [...]
No, we’re not talking about airlines, we’re talking about restaurants. People in Europe are used to this already, but as an American visiting the UK recently, it was slightly surprising to see different prices for food and drink consumed on premise vs “carry-out”. For example, a muffin at a coffee shop might be £1.70 to [...]
As a business traveler, I am aware of the $9.95 for 24 hours of internet access that many hotels levy (although I try to stay in hotels with bundled access). Also, I know London is expensive. But that still didn’t prepare me for the £100/day that the Savoy charges for a day of access. At [...]
Recent research by Akshay Rao and Haipeng Chen confirms that people have a hard time processing a sequence of percentage discounts. For example, if you have a $100 item at 20% off, and then take another 20% off, what is the price? In most cases, it’s 20% off $80, or $64, not $60. The researchers [...]
Punished by the the popularity of cheap DVDs, video-on-demand, and the Netflix DVD-rental-by-mail service, Blockbuster announced further price cuts on its subscription plans. These plans allow consumers to rent and return videos at stores or by mail. The added ability to rent something immediately in the store, or return to a store, should provide additional [...]
