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Pricing Strategy

3 Examples of Price Points

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Price points are prices that support a level of demand that suddenly drops if you charge any more. For example, many people may be willing to pay $9.99 a month for streaming music but demand may fall dramatically after $10. There are several reasons for price points:

Customary Price

In many cases, a particular product has a customary price that people remember as reasonable. Prices tend to stick at these prices even when the seller's prices increase. Any attempt to exceed a strong customary price may result in a dramatic drop in sales.

Substitution Price

Many goods have substitutes that will grab sales if prices rise beyond a certain point. For example, if the price of red carnations rises above the price of red roses, demand for carnations may suddenly drop at that point.

Perceptual Price

People may perceive similar prices as completely different. For example, a home that's asking $990,000 may feel much cheaper than $1,000,000.
Overview: Price Points
A price that supports a certain level of demand that drops dramatically if you charge any more.
Related Concepts


This is the complete list of articles we have written about pricing.
Algorithmic Pricing
Bargaining Power
Benchmark Price
Price Fixing
Cost-plus Pricing
Price Gouging
Customary Pricing
Decoy Effect
Everyday Low Price
Marginal Utility
Willingness To Pay
Dynamic Pricing
High-Low Pricing
Market Value
Flat Pricing
Loss Leader
Predatory Pricing
Price Discrimination
Snob Effect
Market Price
Price Competition
Price Leadership
Premium Pricing
Price Economics
Price War
Revenue Management
Veblen Goods
Price Floor
Price Promotion
Price Sensitivity
Price Skimming
Price Umbrella
Pricing Power
Pricing Strategy
Sticky Prices
Value For Money
More ...
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