The Power Of Optimal Pricing
from the changing-all-the-time dept
A while back I worked at a catalog company in marketing. One of my projects was to go through all of our catalogs as we got ready for the newest versions and reprice everything. I was told to do this the same way it had always been done: by comparing the price of each product in the catalog with the same (or similar) products in two competing catalogs, and then looking up our cost on each product, and setting a price that was (if possible), just below our competitors but still above the cost. There wasn’t much science to it, and as most pricing strategists will tell you this is not a very smart way to price things. But, at the time, it was all we had to go on. These days, however, there’s a growing market for price optimization software that gives much better information on how to price goods. Users of these products seem convinced – as they tell stories of how much more profit margin they’re now bringing in. The writer of the article seems positively shocked that the same good gets priced differently in different stores, but I’m not sure why that’s such a big deal. That seems like smarter pricing, as you are able to better adjust to customer demand within specific markets, rather than across all markets.
