A lot of what I read about Pricing — that sorely misunderstood field — leaves me suspicious or even cynical. Is there no more science to pricing than trial and error? Well, yes, there’s what the competition is charging, but you’ve gone to great effort to be different from your competition, so why should their price be your guide?
The Importance of Framing from Dollars and Sense: The Pricing Blog makes sense to me. It points out what we intuitively know, “Premium providers should not position against the low-price providers, but against the value they provide.”
Buyers do construe the value of a product or service against other price reference points — could be the competition’s, or could be in comparison to other products in your own line. For example, “…if W-S [Williams-Sonoma] introduced a $1000 breadmaker, they probably wouldn’t sell too many of them, but they’d sell a lot more of the $450 model.”
Strategize how you can build premium and basic offerings into what your business sells. You may not sell much of the premium product or service, but it could help you sell more of the basic offering.