Pricing Marketing Guides
Pricing Strategy
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John Spacey, January 10, 2016 updated on January 15, 2023
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 PriceIn 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 PriceMany 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 PricePeople may perceive similar prices as completely different. For example, a home that's asking $990,000 may feel much cheaper than $1,000,000.
Pricing
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