Quote:
Originally Posted by Andrew H.
Finally, the other complicating issue for sellers is maximizing your income, which may be best accomplished by setting multiple price points over time. I.e., if you can sell 1,000 books at $10 or 6,000 books at $3, your best approach is not necessarily to price your book at $3. The best approach is likely to price your books at $10 until you've captured the people who are willing to pay $10 for the book. (1,000 people). Then price your books at $6 to capture the people who are not willing to pay $10 for the book but who will pay $6 for the book (say 2,000). Finally, price your book at $3 to capture the remaining people who were willing to pay $3 for the book (3,000 people).
Total revenues with this model are ($10x1,000) + ($6x2,000) + ($3x3,000) = 10,000 + 12,000 + 9,000 = $31,000 in revenue. Much better than $18,000 in revenue you would get by pricing the book at $3 to begin with.
Obviously, this is just a model; and of course it may be hard to know when you should drop your prices. But, clearly, the corollary to the idea that you can sextuple your sales by dropping prices by 1/3 is the fact that 1/6 of your customers would have paid 3x as much for the book.
|
I have been thinking along this line as well, but my conclusion is that you can get away with this pricing model only once. After that, the market will expect the price to drop to the $3 level and will wait for that to happen.