Step Three: Developing and Pricing Options
It cannot be too strongly emphasized that the deciding factor in price setting is the price which the consumer is willing, or can be induced, to pay.
––R. Edwards, Economica, 1945
One of the most customer-centric strategies your firm can deploy is to offer an array of options to your customers. It is very “outer-directed,” rather than just offering a one-size-fits-all, take-it or leave-it option. Customers prefer options, especially in today’s world where they face a plethora of choices regarding who, when, what, and how to patronize a business. Contemplate these examples:
- Universal Studios Theme Park’s standard admission price is $49, but for $99 you can get a “Front of the Line Pass” and for $129 a “VIP Experience,” giving guests behind-the-scenes access.
- When the final book in the Harry Potter series was released, the publisher offered the regular version for $34.99 and the deluxe version for $65. They were ranked number one and two, respectively, on Amazon and Barnes and Noble Web sites.
- Tourists in New York can avoid the long lines to get to the observation deck of the Empire State Building for double the regular admission price, guaranteed to take no longer than 20 minutes.
- Guests can purchase a one-day pass to Walt Disney World, or add additional days for a progressively lesser price, down to the fifth day costing only a marginal $3—illustrating the economist’s law of diminishing marginal utility.
The Psychology of Price ...