PART IRethinking Pricing Strategically
The impacts of strategic pricing decisions can reshape a business, an industry, or society, as our stories in the Introduction demonstrated.
Sometimes, though, the right pricing strategy can reshape all three at the same time, with consequences that last for decades.
Think back to the Model T, the automobile that Ford Motor Company founder Henry Ford launched in the early 1900s. Ford receives credit for standardizing the product (“Any customer can have a car painted any color that he wants so long as it's black”), for mass production with the modern assembly line, and even for labor policies with the minimum wage of $5 per day for an eight‐hour workday.1,2
You might be surprised, however, to learn that these breakthroughs in design, manufacturing, and labor management all resulted directly from one common motivation: Ford's pricing strategy.
Ford wanted to manufacture a product that even his own factory workers could afford. But that goal clashed with the prevailing pricing strategies of carmakers at the time, such as Ford's former employer, the Detroit Automotive Company. “The whole thought was to make to order and to get the largest price possible for each car,” wrote Ford about Detroit's pricing strategy in his autobiography.3 Detroit applied the same philosophy to the sale of aftermarket parts. “It was considered good business to ...
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