Smarter Pricing: How to capture more value in your market

Threshold price points

Price setters must take into account psychological thresholds of pricing points above which demand is forecast to fall off considerably. The UK white goods industry holds that there is a £199 psychological barrier for refrigerators and washing machines (see Figure 10.2). If entry prices exceed this threshold, it is believed that customers will be discouraged. A European Union Directive will require manufacturers to manage the cost of taking away and recycling consumers’ old products. According to Claire Murphy (2005) writing in Marketing Magazine, manufacturers want this presented as ‘£199 plus £5 recycling levy’. On the other hand, the UK government fears that the cost will be perceived by consumers as another tax and ...