Hi Everyone, Just curious -- when you create a product, how do you try to set/test the price point? Software obviously has very high (100%!) margins, but I was reading somewhere that if Toyota could charge 1% more and keep sales/costs exactly the same, they'd make 10%+ more in additional profit (because, conceivably, they'd keep all of that 1% and it would go straight to the bottom line). The math seems to check out on Google Finance when looking at Toyota's revenue/profit, too;)
How do people on this list set and optimize price? Do you poll customers? Look at competing/complementary products? Gut feel? Does anyone use coupons to try to attract more price conscious customers? I did something like this once upon a time and it had some good results (I figured that if you hadn't bought after X days, I might as well offer a coupon...yes, it could cheapen my product, but it also helped me isolate the "price sensitive" customers since a good customer wouldn't wait 60 days for a coupon!). I actually went progressively more aggressive with coupons and it worked well. I also tried creating "Silver and Gold" versions of my product (Gold having more features and costing more) in the same way that Nike creates different priced shoes. The shoes have different features/materials, but the difference in price is more about capturing consumer surplus. Curious to hear what other thoughts/ideas people here have! Thanks, Alex [Non-text portions of this message have been removed]
