Everyone is different. We have different needs, wants, desires, tastes, habits etc. Most relevant to Pricing, everyone has a different Willingness To Pay (WTP). We don’t force everyone to wear the same clothing style, or eat the same foods, or drive the same cars. Similarly, we don’t have to force everyone to pay the same price. We can customize pricing.
Car pricing is customized. Not the sticker price, but the actual price people pay. I just bought a new car and it is very unlikely that I paid the same price as anyone else for the same car at that dealership. I certainly negotiated differently and had a different WTP.
Airline seats are pretty customized. Although a few people on the plane may be paying the same price, not many are. The airlines have figured out great techniques for charging different customers different prices, trying to capture more of each customers’ WTP.
Some items, like potato chips, are harder to customize for just a few people, but they do customize for larger groups. They charge different prices for different flavors in different regions of the country. They offer coupons to let the price sensitive pay less.
Pricing is customizable. The first step is thinking of two customers or customer types that have different WTPs. The second step is figuring out how to let people with lower WTP pay less while not letting people with higher WTP have the low price, all while everyone thinks it is fair. That’s where the fun comes in.
The answers are in several past blogs and in part 2 of Impact Pricing: Your Blueprint For Driving Profits. (Shameless plug.) I’ll certainly write more on this in the future as well (for anyone too price sensitive to buy the book.)
Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author
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