Pricing-Vricing
A nice article from Joel on Pricing and why it is so difficult to get right. I especially liked his bits about why enterprise software is overpriced since I could relate to our sales process in Talisma.
An interesting concept he explores is consumer surplus (tapping customers in a different price segment) and there are two examples I could see in the Indian market. First is the Shampoo Sache - right now a sache costs 50% (price/ml) if you compare the cost with a bottle. But most people who can afford bottles buy it anyway because of its convenience, they assume (wrongly here) that bigger is cheaper and because the sache doesn't gel well with their expensive bathroom.
The other is pizza hut where Indian flavored pizzas are far cheaper than western flavors. Smart move where pizza hut because usually western flavors are preferred by a crowd that can pay more. So the pricing is decided by customer's ability to pay rather than the product's worth.
An interesting concept he explores is consumer surplus (tapping customers in a different price segment) and there are two examples I could see in the Indian market. First is the Shampoo Sache - right now a sache costs 50% (price/ml) if you compare the cost with a bottle. But most people who can afford bottles buy it anyway because of its convenience, they assume (wrongly here) that bigger is cheaper and because the sache doesn't gel well with their expensive bathroom.
The other is pizza hut where Indian flavored pizzas are far cheaper than western flavors. Smart move where pizza hut because usually western flavors are preferred by a crowd that can pay more. So the pricing is decided by customer's ability to pay rather than the product's worth.
posted by Saurabh Chandra at 12:05 AM
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