Why pay more when less is just as good?

iPod for 25$? WTF!

Price sends a message. Imagine the iPod was sold 25$ instead of 200$. People would think the iPod is a cheap mass-market junk if it had this pricing. I personally would. Those people who strive to have the hype-est toy will go buy something fancy that will set them apart from others. (And we don’t want the Zune to be the luxury item, do we?) People want luxury. They feel good about being able to afford the elite stuff.

Quiksilver rocks!

Take for example Mr. Price vs. Edgars. I’m not sure if those shops exist in the united states, but all you need to know is that they both sell clothes. Mr. Price is where you can buy cheap-ass stuff that still look good. Edgars is the luxury expensive shop that sells branded clothes (Quiksilver, Billabong…). The shirts are probably the same quality, but Mr. Price sells them at 7$ a shirt, while Edgars sells them at 50$ a shirt. And guess what, I buy ALL my clothes at Edgars. In fact, I have only very few items in my wardrobe that aren’t branded with some famous but expensive brand. The difference of the price I paid at Edgars to the price I would have paid at Mr. Price for the same amount of clothing is phenomenal, and amount to hundreds, if not thousands of dollars for this year. Is this a stupid and pointless waste of money? Yes! Will I spot doing so? No! I buy with the expensive shop because of the message it sends out. Edgars is reputed to be the most expensive shop, and the fact that I shop with them makes me feel better about myself. It also makes others look in envy at me! That’s what I paid that extra premium for.

Subliminal messages

This theory also applies to software pricing. Between two products, one priced 10$ and the other priced 50$, John Doe will automatically think that product A is cheap crap, and product B the quality product. In reality, this may not be true, but it’s the message that this pricing gives.

The correct spot

In the end, it’s all about finding the right price. But under-pricing can be much more harmful than over-pricing. I remember reading a blog post about someone who under-priced. He sold his software for a really low price, and barely made a thousand dollar in a year. He then went on to narrate how he then increased the price, twice and how his sales jumped to 25k$ a year. While this is an extreme example, it illustrate this theory well.

Another example in the Wii. It is also under-priced, and Nintendo can’t supply the demand. It’s basic economics. Apple didn’t make this mistake, and priced the iPhone 600$ to lower the demand, so that their supplies would hold. Now that the supply has increased dramatically, they adjusted the price to increase the demand.

Of course, over-pricing can be just as harmful, take the PS3 for example. It’s so unbelievably expensive that it wasn’t the success that Sony hoped it would be. Back in the Mac shareware world, take a look at Stone’s products. Did you see that price? How the hell does it even sell? Well, unlike what people most would think, they are not actually over-pricing. If it sells well, then you’re price is not too high. It’s all about what your target market is, and what they can afford.

So, Why pay more when less is just as good?

Because I can afford it, and Quiksilver is THA SHIT!
/me R kewl!
Sometimes I wonder, have I priced Exces too low?

This entry was posted on Friday, September 7th, 2007 at 4:43 pm and is filed under Business, English. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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One Comment
September 9th, 2007 at 3:41 pm

It’s actually incredible that most Mac software is as cheap as it is. When you consider the work involved in producing even a “simple” quality app, $20 is a super bargain.

The truth is, the vocal minority who complain of prices being too high are the same ones who rush to be the first commenter or get into endless MS/Mac religious wars. That is, they aren’t serious.

(First post - yeah dude!)

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