The Pricing Manifesto
Essential Rules as Revealed by Adam Juda
- Purpose before price - Know your goal before you start thinking about your pricing. The most appropriate pricing strategy depends upon the desired outcome.
- Buyer before product - Analysis of the buyer, not the product, is the first step in understanding a customer's ability and willingness to pay. Many buyers do not behave rationally.
- What appears as one may be three - The decision maker, the user, and the person who pays for a product need not be the same. For this reason, the principal-agent problem must never be ignored.
- Perceived value must accompany actual value - A product that does not appear desirable will never command high prices - no matter the value delivered.
- No product is valuable - Value exists solely in the effects of a product's purchase, possession, use, and sale.
- Purchase costs are not the only costs - A product's total cost may be significantly higher than its purchase price. Sometimes the difference can be substantial.
- One-size-fits-all rarely fits all - Some products only appeal to a small number of potential buyers. Offering several variations may attract additional buyers.
- Some competitors aren't obvious - Sometimes competitors look dissimilar or solve customer needs in very different ways. Often the most popular alternative to the purchase of a given product is the decision not to buy anything.
- Pricing is powerful - A bad pricing strategy can kill a good product. A good pricing strategy can often resurrect a bad one.
- Imitation is not a sincere form of flattery - Effective pricing requires research and analysis. Copying a competitor's pricing may be quick and easy, but it rarely works well.
- Don't price low - If you are competing on price, you are probably marketing your product as a commodity. Don't sell commodities. Sell Premium products instead.