
The Price of Bad Pricing - davidw
http://boss.blogs.nytimes.com/2011/07/06/the-price-of-bad-pricing/
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pwhermanson
How do you develop a pricing scheme for a new product that hasn't been
marketed before? At any point in time, the true value of a new product to
consumers seems intangible and subjective.

It is important to consider what market you are going after when thinking
about pricing. Lets think in terms of art for an example of a new or
misunderstood product. If the art is priced just above the cost of materials,
say, $75. What market of people would buy it? I'm sure plenty of people would
see that for its price and think ooh, pretty. I can afford that. Who are those
people going to show off that artwork to? Are they going to talk about it?
What about the people that will look at the price and automatically assume
that it is poor quality. OR, are people not defining the work's value by its
price, but by the name of the artist? If the price is low, then that must mean
that the artist isn't well known. Now think about if the artwork was priced at
$10,000. Someone might buy it because they are a collector looking for
something in particular and you were lucky enough to give them what they
wanted. Or maybe they will buy it just because they can. They will pride
themselves on being able to show friends and colleagues that they appreciate
the finer things in life.

Elasticity in pricing is already complicated enough to understand let alone
applying it to a real life situation. But when you add a subjective or new
misunderstood product, pricing can play an even more prominent and critical
role in how a company is perceived.

Check out this book: The $12 Million Stuffed Shark: The Curious Economics of
Contemporary Art by Don Thompson

