From the course: Market Research: Optimizing Price and Willingness to Pay
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Fundamentals of pricing research and willingness to pay
From the course: Market Research: Optimizing Price and Willingness to Pay
Fundamentals of pricing research and willingness to pay
With all the talk about business models and financial projections and profits and investors, many companies seem to overlook something fundamental, the fact that your customers are human, and they don't always make rational decisions when they look at your products and prices. The way they feel about your price can have a much bigger impact than the price itself. If your company is not taking advantage of that basic psychology, you could be leaving serious money on the table because getting pricing right can transform your business. There are three key factors that go into how someone feels about your price. First, customers don't know the intrinsic value of your product or any product, really. So what happens is that they compare prices based on something similar they have in their head. This is known as reference pricing. For example, let's say you're a new homeowner and you've got to get your roof replaced. You have absolutely no idea what it's going to cost you. So intrinsically…
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