People's willingness to pay is stretched slowly over time. Įven in industries that have prices that trend up, it happens incrementally as per the enterprise data management. Hopefully your niche or industry has this characteristic. Real Estate, (in some regions of the country), have this characteristic, and there are others. You're much better off operating in one of those markets than you are in a market that has the downward trends.Ĭollector items frequently have this characteristic. There are special markets that have built in anticipation related to price increases. Guess which way I expect prices of my old car to keep going? Admittedly it was much nicer than mine ever was, but it sold for $61,600. Last year they sold a 1968 Chevelle Malibu. They've created the expectation that collectible hot rods quickly appreciate in value matrix. Their auctions are huge events, regularly televised, and they create powerful new "normal prices" for these cars. The smart marketers at the Barrett-Jackson collector car auction in Scottsdale Arizona have done a lot to impact the price of collector muscle cars. Lets have a look at the premium pricing strategy applied by marketers. Imagine my surprise a few years ago when I started seeing muscle cars sell at auction for increasingly high prices. My brother gave it to me for free and helped me get it running. If you're in an industry like that - my only advice is - maybe you should look for greener pastures.īut there are other industries where customers know that prices trend up and not down. There is constant pressure to lower your prices. Many industries have these anticipated future discount characteristics. Want an awesome new car, but need a 30% discount? Wait for two years and buy it used. Just wait, (if you can), until they release a generic version. Just wait a year or two and it will be less than half the current price.ĭon't want to pay full retail for a new prescription drug? Customers are smart and when they can't afford something they either look for a cheaper alternative, or they wait until they can get the item at a discount.Ĭan't afford the eighty-inch TV at Costco? Many customers learn to anticipate the inevitable discounts that will occur in association with some products. Either is accepted, as people grow accustomed to paying what needs to be paid to get a specific product or service. People also grow accustomed to prices trending either up or down. As in, you can't believe it's happening, but you're energized to see how it will play out. If you appreciate a product, such as art or a collectible, and you observe the prices skyrocket, you frequently have the feeling of "awe". Likewise, if you see your favorite product skyrocket in price, you know the emotions involved - anger, frustration, and even rage. If you've encountered a "90% off sale" on your favorite product, then you know the emotions involved bliss, greed, and a panic to snatch up as much as you can afford! Fall outside that range, and the customer gets emotionally uncomfortable. If your price falls inside that range then the purchase decision is easy. They develop a "range" of "okay" deep in their gut. So people grow comfortable with a certain range of prices over time. They have a number in their head, and if your offer price is within reason, they'll agree to buy.Īccording to noted researcher Ernst Weber it is the relative percentage of change that people notice, not the absolute amount. There is no "right price" for your product. People are sensitive to different pricing strategies in relation to what's "baked in" to their minds. Penetration pricing strategy is never absolute, and rarely ever stable.
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