Beyond Cost Plus Summary: June 2015

Jun 30, 2015

 

Two new webinars and new content on pricing hurdles, bundling vs. unbundling (and the case for each) plus how being patient can save you money.

 

The term reservation price was added to the pricing glossary this month. Reservation price is interesting in that it depends on whether you are the buyer or seller. If you are the buyer it is the highest price that you will pay. If you are the seller it is the lowest price that you will accept.

The consumer section also got new content – a post on when patience is rewarded with lower prices. Sellers often work hard to convince to buy immediately in order to get what they assure us will be the lowest price they will ever offer. The truth is that in a great many cases the price will only ever go down, and the seller is really using the buyers lack of patience to get them to voluntarily pay a higher price. In these cases money can be saved by just waiting a little.

There were also two Beyond Cost Plus webinars this month, part of the SAF Webblast series. The first of these was on charm vs rounded pricing. This topic was of interest to a lot of florists because most have strong feelings about it. That's OK, there are arguments to be made either way, but there is also enough great research on the subject to make an informed rather than emotional decision.

Some excellent questions came from the participants at the end of the webinar, and one of these warranted a follow-up post. The question asked was "at what point does charm pricing become irrelevant?. The answer is that there is no simple number beyond which charm pricing isn't effective. Charm vs rounded pricing isn't about amounts but about image, perceived value and more. If a seller wants to appeal to a price sensitive customer and imply value then charm pricing makes sense even if the product or service costs $4,999 or higher. On the other hand even a relatively inexpensive item can benefit from the cachet provided by rounded pricing, while charm pricing will always, at least to some people, look cheap.

The second of the SAF Webblast webinars was on bundling, and generated several additional posts. One of these looked at how airlines and fast food have followed very different bundling paths over the past few decades. For airlines unbundling has practically been a religion, while fast food has increasingly gone the other way and embraced bundling over the same period.

Where do flowers fit in? Like the airlines most florists have over the last few decades increasingly unbundled things like delivery and service fees, but there are lessons to be learned from both fast food and the florists for whom bundling is a very profitable tactic.

Another post looked at real world examples of pure bundling. This was added because of the webinar – it seems like we encounter mixed bundles all the time, and can easily name off examples, but people have a harder time recalling experience with pure bundles. Pure bundles don't give you the option of purchasing the component items separately, they are only available when purchased as part of the bundle. One example is the modem you have to rent from your ISP to get internet access. You can't just buy bandwidth without the modem, and you can't just rent the modem without also paying for bandwidth.

Finally a new real-world example of pricing hurdles was added. This hurdle was encountered at a busy airport, and was carefully constructed to ensure that only the most price-sensitive travellers would pursue the discount. Most customers would happily pay full price instead.

There is one more webinar in the SAF Webblast series early next month on Wednesday July 1. This session looks at the idea that margin isn't everything, and will look at how margin can sometimes be sacrificed to increase sales and profit (without cannibalizing full price sales).



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Sponsored by FloristWare

Beyond Cost Plus is sponsored by FloristWare – the most powerful, affordable and easy-to-use POS software for retail florists – as part of their commitment to the floral industry and desire to see flower shops be more successful.

FloristWare – flower shop software/POS system.

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