Pricing pixie dust

November 10, 2009

Just re-read a chapter of Predictably Irrational.  Fascinating thoughts on pricing. Consider this… Let’s say you’ve got a restaurant, and the most expensive entree is a $20 strip steak. If you add a $24 soft shell crab entree, you’ll increase revenue. But you won’t sell much if any of the $24 crab.

Huh? Pricing is all about context. Adding the $24 crab makes the $20 steak seem inexpensive on a relative basis, and you’ll sell more of it – trading customers up from the $17 entrees.

If you are thinking about pricing strategy, give this book a look.