10. Pricing Analytics

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“Price is what you pay, value is what you get.”  — Warren Buffett

Pricing Overview

As consumers, we are all familiar with prices, as we interact with them every day.  They are prominently displayed in display advertisements, storefronts, and the incessant barrage of ads that we encounter online.  

Even before we became consumers, we learned about prices through the conversations of adults around us — we might have heard excitement about a bargain, or grumbling about a rising price, or a general complaint that a place was “too overpriced” or even a “rip-off.”  As adults, we often interpret prices as signals.  Low apartment rental prices might suggest that a neighborhood is unsafe or undesirable, while a high ticket price to “Hamilton” suggests that the performance must be top-notch.  

Price is unique among the four components of the marketing mix, as it is directly tied to revenue (product, promotion, and placement, on the other hand, are more tied to a firm’s costs).  Determining the right price to charge for a particular product is an ongoing challenge for businesses — if they charge too little, they may be leaving money on the table.  If they charge too much, they could alienate their customers or even lose business.  

Of course, price is not the only determining factor in a buyer’s decision.  Buyers also want to know about quality, service, and whether they can trust the seller.  Many intangible factors influence a purchase decision.  As consumers, we are not even always completely conscious of the reasons for our purchase decisions.  Our decision to purchase some particular item may depend on our mood (which may in turn be influenced by hunger, fatigue, or a song playing in the background), the way a display caught our eye, a memory or feeling associated with the product, or literally any other reason imaginable.