The Art of Pricing by Rafi Mohammed

Author:Rafi Mohammed
Language: eng
Format: epub
ISBN: 9780307337320
Publisher: Crown Publishing Group
Published: 2005-09-20T00:00:00+00:00

Explaining Lessons from an Auction

Recall this book’s central idea: hidden profits can be realized by understanding and capitalizing on the fact that different customers place different values on a product. After presenting the Value Decoder framework, I can better illustrate why customers have different valuations for the same product. As you can see, every single element of the Value Decoder involves subjective consumer decisions. Is the Fila brand worth 25% more than the Nike swoosh? Does the usual 30% price hike around Valentine’s Day stop you from purchasing a dozen red roses? Will a buy-one-get-one-free sale on hamburger buns compel you to purchase more hamburger? Will that long-hoped-for 10% raise allow you to go on a dream vacation? How low do private-label soda prices have to drop for you to stop buying Pepsi?

Every facet of every component of value is driven by every consumer’s subjective judgment. Think about how diverse people are. It would be surprising to find two people who value the same product identically. Still don’t believe me? Pick any item in the latest Sharper Image catalog and ask your friends what price they would be willing to pay for it. My bet is that no one’s price will match. To go one step further, I’d bet that their prices won’t even be close to one another’s. The highly subjective nature of value is the reason product valuations vary so widely.

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