by Adam Juda on Sunday, November 9, 2014
Sometimes, as I walk around Boca Raton, people come up to me and ask me "Who is your favorite pricing economist?".
They typically expect me to name a famous economist like Adam Smith or Milton Friedman. They're all shocked when I tell them that the person who understood pricing best was the actor Bruce Lee.
There is no example of his economic genius more obvious than the scene in Enter the Dragon. Faced with a hostile opponent, he demonstrated his approach to martial arts. Using the art of fighting without fighting, he was able to defeat his menacing opponent with inaction, rather than direct combat.
The scene was intended to be humorous in nature, but marketers and businessmen could learn a lot from this brief encounter. When selling a product or service one must consider both the costs of fighting (buying) and non-fighting (non-buying).
- Cost of fighting - The out of pocket costs that a customer will spend on your product. This is what is traditionally called the price of a good.
- Cost of non-fighting - The out of pocket costs that a customer will spend if he doesn't purchase your product.
Let's take the example of a person selling a computerized accounting system to a business. What are the associated costs?
- Cost of fighting - the actual cost of the accounting software.
- Cost of non-fighting - the costs that will be incurred from not buying the software (such as additional labor for manual tasks)
To sell your wares, you just need to remember the works of the great martial-economist and make sure that your opponent understands the two types of costs (buying and not buying).
Want to learn more about understanding how to calculate the costs of buying and not buying so that you can make your next sale? Why not buy a copy of The Software Pricing Handbook? Can you really afford not to make this purchase?
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