A Powerful Pricing Thought Experiment

Courtesy of Seth Godin, who asks you to think about real estate agents charging 6% of a transaction, and facing mounting price pressure.

The challenge is… what if you had to charge 7%. What if you had to charge more when everyone else was charging less?

What would you do? How could you make it worth it?

Whether or not you end up charging 7%, 8%, 6%, or 2%, this thought experiment will lead you to some interesting ideas on differentiating your offerings.

I recently had this conversation with a pricing director for a company that typically sells products for under $10. I asked him to ask his product managers how they would sell an item in the same category for $100. This breaks the box of conventional thinking in which we often trap ourselves, debating between $6.99 and $6.49 price points. Whether or not you get to your $100 product, you may get to $12.99, or you may just sell a whole lot more at $6.99.

What would you do differently if you had to raise your prices by 100%? (This targets the value-focused part of the market.)

What would you do differently if you had to drop prices by 50%? (To focus on the price-driven part of the market.)

What might you bundle or unbundle? What would you do completely differently.

Have a great Thanksgiving.

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