Monday, July 31, 2006

Spolsky on pricing theory

Why does what you buy cost what it costs? Read Camels and Rubber Duckies - Joel on Software. I have a seriously dense textbook on pricing theory. Spolsky covers the key points in a single article. If you buy anything, it's worth reading.

It's non-trivial.

BTW, one technique he doesn't mention is sandwiching. Apple does this brilliantly. Sell one thing cheaply, one in between, one expensive. The cheap one is a bargain, but it's missing something everyone wants. The expensive one is wicked. The result is people will happily buy the middle one, and will pay more than they would have if the cheap one (which has a crummy margin) didn't exist.

The bottom price exists only to elevate the middle price.

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