Good Thoughts on Pricing

I just finished a marketing management MBA course last week.  Before taking the course, I really had no clue about the importance of marketing to the life of a firm.  I could not decipher between marketing and advertising.

This weekend I read a post by Paul Williams on the Marketing Profs Daily Fix Blog called “Discounting Prices Discounts Your Brand.”

Williams makes a lot of the same points that my marketing professor hammered in our brains this past semester.  He argues that a company should never resort to discounting its prices to drive up sales.  By doing this you are “eroding your long-term margins and your long-term sales.”  While the company may see this discount as a short-term tool to drive up sales, it has effectively change the “perceived value” that the customer has regarding the company’s brand.

Williams’ recommendation

  1. If customers are complaining about your prices, make sure you aren’t charging too much for your product.
  2. Instead of giving away money through discounts, “strategically provide add-on services or products.”  You won’t erode the base price of your product, and you may offer your customers items of value they have never tried before.

Williams ends the post with the following paragraph:

Once you start offering discounts, the only way to get that rush the next time, is to discount more. If this cycle continues, your margin is gone, your prices are bargain basement, and your brand has reduced value.

Don’t Forget to Recycle Your Old Electronics

According to the Electronics TakeBack Coalition, less than 13% of electronics gear gets recycled. Consider turning in your old iPod to Apple for a 10% discount on a new iPod, or take Dell up on their option to ship back your old Dell equipment for free.

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