Another Way to Set Prices– Ask Customers to Do It For You

Internet service provider CI Host introduced a “name your own price” program last week, allowing customers to bid on hosting services. CI Host then accepts or rejects the bid.

Essentially, you can bid on an existing hosting package, but you must prepay for the year. I suspect this is one part marketing gimmick and one part demand estimation, since it’s not heavily promoted on the site, and only relatively savvy users are likely to know how to bid successfully. (One piece of important information missing from the web site is what happens if they reject your bid– can you re-bid with a slightly higher price?) This type of demand estimation suffers from the usual self-segmentation issues and risks alienating other customers who may feel that they are overpaying. However, it’s also an intriguing strategy with appropriate gating factors.

Not that you should necessarily do this, but what do you think would happen if you gave your customers the chance to bid on your goods and services like this? What would be the response from various segments? Might there be latent demand at lower price points for a product that you could substitute for your current “full priced” offering?

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