Start Up Blog

Pricing & relativity

Posted in entrepreneurship by Steve Sammartino on December 19, 2009

While reading SamsMojo earlier this week I was surprised to learn the prices of the top 10 selling iphone apps for 2009. In fact, the price for the top seller was more than 10 times what I expected at $99 – The TomTom navigator app. Not the $3 we’d get as a response if we asked a random sample of people.

Sure, it’s a high price as far as iphone apps go, but it much cheaper than a $500 TomTom. The point for startup is this. There is no such thing as expensive. There is only expensive in relation to the set of relevant substitutes. And when we are pricing our brand or startup all pricing decision need to be made relative to the alternatives.

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Trick Pricing

We are smart people.

We don’t get duped very often.

We know a scam when you see when.

We’re even smart enough to know that $9.95 is really $10.00

So why would we treat our customers in such a condescending manner. Do we really think that any of our customers won’t be smart enough to know this?

Now that we have answered this question let’s ask ourselves why you would ever engage in such trick pricing for our customers.

At last, we’re entering the age of ‘authentic capitalism’, and $0.99 cents isn’t fooling anyone. In fact, you’re quite possibly embarrassing yourself on a commercial level and damaging your brand or start up. The threshold price point is the biggest hoax in consumer marketing. My suggestion, is to have honest pricing.  Charge to the dollar. Make it simple and gain respect simultaneously. Our customers won’t mind, really.

Who wants a pocket full of change anyway?

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