An End-of-Year Post Thanking Pricing Conundrum Readers & Supporters
It also includes a top-11 list of the best posts from 2023
It’s the end of a successful year for this selfish pet project of mine to write about pricing strategy, value and valuation, buyer response to price, and related topics with a view to learn, educate, entertain, and provoke thought. Although I’ve had this Substack for a couple of years now, I’ve really only focused diligently on it in the last six months or so, as I migrated away from my regular blog on the Psychology Today site called The Science Behind Behavior to write on this Substack regularly.
So far, my posts have been a mix of pricing strategy case studies, discussions and analyses of topical pricing issues like shrinkflation, indirect price increases, and price transparency, the exploration and interpretation of classic academic pricing papers, and pithy textbook-like descriptions of core pricing concepts. Essentially, I write about things that interest me and that I think are useful.
In 2024, in addition to these themes, I also hope to write longer substantive pieces on topics like price bundling, product line pricing, subscription pricing, eliciting willingness-to-pay from customers, price communication, and so on, as I extensively revise my 2017 book, How to Price Effectively: A Guide for Managers and Entrepreneurs. Sections of the second edition of my book will appear on this Substack throughout 2024, long before the book is published, giving you advance access and the opportunity to provide feedback.
I want to do two things in this last post of the year. First, I want to say thank you from the bottom of my heart for supporting my work. The fact that you continue to read my posts (and hopefully use some of the ideas in them) encourages and motivates me to keep writing them. I cannot thank you enough for the most precious gift of all: your time and your attention. I promise to continue writing posts that make it worthwhile for you.
Second, I want to offer you eleven1 of the most popular posts from 2023 that I liked the best. They’ve all been unlocked, so whether you are a paid subscriber or not, you should be able to access and read them and share them freely with others.
I must admit that writing this blog is, first and foremost, an exercise in self-indulgence. I get to write about things that interest me. But it is more than that. It is an honest effort to simply learn, understand, and share that understanding with like-minded people. As Richard Feynman said, few pleasures in life are greater than the pleasure of finding things out. Here’s to another year of finding things about, trying to untangle all the interesting conundrums in pricing strategies and thinking about and learning new things.
Now, on to my top 11 list that I hope you find useful and informative.
A Balanced Assessment of Cost-based Pricing
While many managers and entrepreneurs have a negative view of cost-based pricing, it has some serious strengths as well. This post provides a general overview of the pros and cons of cost-based pricing and hones in on situations where it is an effective pricing method.
Cepheid’s Tuberculosis Test Pricing Dilemma
This B2B case study explores how Cepheid responded to a coordinated campaign led by Doctors Without Borders and high-powered influencers to lower the price of its tuberculosis test. It provides useful lessons for brands or companies that are accused of price gouging.
How Managers Made Pricing Decisions in 1939
This post takes a deep dive into the classic Hall and Hitch (1939) paper “Price Theory and Business Behavior” to explore how managers made pricing decisions before the Second World War. The more things change, the more they remain the same.
Understanding the Difference Between Price Level & Price Structure
Many managers think of pricing decisions in terms of price levels (average prices, overall percentage changes, etc.) when they should be thinking in terms of price structures. This post defines and lays out the basic elements of a price structure and provides some ideas on how to design an effective price structure for your offering.
This post revisits and considers Ginzberg's (1936) “Customary Prices” going back to the origins of left-digit bias research in pricing. Ginzberg’s main point is that the left-digit bias is unreliable, something that many modern managers seem to have overlooked. The bias’ occurrence is likely to be dictated by an amalgamation of contextual factors.
Digital Pricing: A Review of the Academic Research
This rather lengthy post is an edited version of the book chapter from my book Advanced Introduction to Digital Marketing (2022), published by Edward Elgar. It reviews and synthesizes the academic literature (mainly from marketing but also from associated fields like operations and economics) on pricing in digital contexts. If you want to know what types of questions about digital pricing interest academics and what they’ve found in the past two decades, you should read this post.
The Dark Side of Costco’s Pricing Strategy
Costco’s pricing strategy has many powerful components, like its exemplary use of two-part pricing to create differentiation, its iconic $1.50 hot dog–soda combo, and its price vocabulary. However, its pricing strategy also has a dark side, marked by heavy-handedness and policing that make its members’ experience miserable, which is investigated in this post. We can learn some powerful lessons about the two sides of effective pricing from this case study.
Experience Curves, Declining Cost Incrementality & Extreme-Value Pricing Strategies
This post explains the significance of the beneficial interaction of experience curve effects and the reduction in incremental costs that occur for many sellers. It provides two ways of harnessing this positive interaction through the use of extreme-value pricing strategies like blowout pricing and low, all-in pricing providing detailed examples of each one.
The Eight Psychological Affordances of Price
The price of any offering has the ability to produce a range of effects on the buyer through psychological mechanisms. These effects can be predictable, influential, actionable, and cost-effective for sellers. This post provides an overview of eight different psychological roles played by the price in buyers’ decision making, buying, and consuming activities.
Algorithmic Transparency & Consumer Disclosure
As algorithms are adopted widely in data-driven business decision making, often involving consumers, the questions of which data is collected and used, how it is analyzed, and the various unintended consequences it produces all gain in significance. In the endeavor to formulate a better understanding of business transparency, this post, an edited version of the book chapter from my 2023 book, Transparency in Business: An Integrative View, considers the research on the various means to formulate and increase algorithmic transparency and the challenges of doing so, along with the host of associated issues concerning consumers whose private data is at stake.
Why Shrinkflation Works So Well (and When It Doesn’t)
This post introduces a “Four-I” framework of consumer response to shrinkflation. Grocery store shoppers tend to be high on four characteristics – indifference, inattention, ignorance, and inertia, all of which favor muted responses to shrinkflation and make it an extremely effective strategy to raise prices indirectly. It’s only when consumers are shaken from their relatively uninvolved, inattentive, apathetic states into more attentive, engaged modes due to external or contextual factors that shrinkflation starts to lose its shine.
11 instead of 10 because I consider 11 to be a lucky number because of the rich, complex meanings embedded in it. If you want to know some of them, here’s a short explanation by Sadhguru.