TapRun Consulting

The Pricing Manifesto

Essential Rules as Revealed by Adam Juda

  1. Purpose before price - Know your goal before you start thinking about your pricing. The most appropriate pricing strategy depends upon the desired outcome.
  2. 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.
  3. 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.
  4. Perceived value must accompany actual value - A product that does not appear desirable will never command high prices - no matter the value delivered.
  5. No product is valuable - Value exists solely in the effects of a product's purchase, possession, use, and sale.
  6. 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.
  7. 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.
  8. 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.
  9. Pricing is powerful - A bad pricing strategy can kill a good product. A good pricing strategy can often resurrect a bad one.
  10. 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 involves neither research nor analysis.
  11. Don't price low - If you are competing on price, you are probably marketing your product as a commodity. Don't sell commodities.