The Art and Science of Pricing

September 14, 2009

Pricing strategy is a big and complex topic with far reaching applications and implications.

As a Trustee for our community’s professional ballet company, we spend a lot of time and energy strategizing around ticket pricing scenarios. We have the twin goals of maximizing sales while also filling seats. So, we think about how much we can charge for the premier seats and how little we can charge for the least desirable seats. Packaging performances, whether by subscriptions or by bundling shows, is also a component of our pricing exercise. Pricing effectively is an art; an effective pricing strategy can truly change consumer behavior.

Driving the consumer to contemplate comparative prices is another pricing strategy. We are hearing from our QSR clients, that their drive-thru customers appear in the window with a McDonald’s soft drink already in the cup holder. McDonald’s deeply discounted pricing strategy is driving fast feeders to change their behavior. Now they drive through TWO drive thrus. Not so fast, fast feeder.

In the dairy aisle of the grocer, the price differential between branded block cheese and private label just keeps growing; another comparative pricing strategy at work. The price of Kraft brand sharp cheddar is $2.78 — higher than I have ever seen. The price of the store brand — only $1.66. On a percentage basis, a huge differential, so, no surprise, consumers, even brand loyal Kraft shoppers are shifting their behavior and buying Brand X. The unanswered question is whether they will ever switch back. Stay tuned for that.

posted by kathy selker September 14, 2009 in northlichin'