We do our best to give great pricing advice, but it sometimes can be good to hear what other people have to say on the topic as well. Let’s take a look at 6 great pricing quotes and see what insights we can draw from their knowledge and experience. (You might be surprised by some of the people on the list!)
"Price is what you pay. Value is what you get." - Warren Buffett
photo credit: insider_monkey via www.insidermonkey.com
Warren Buffett is a pricing guru, though he specializes in pricing companies in the stock market instead of pricing products. Even still, his pricing insights are very much relevant to your pricing strategy. His quote here is a great reminder to look at your product from your customer's perspective. Customers will only buy your product if they believe that the value they’re receiving is greater than the price they’re paying; otherwise, why would they pay? This idea forms the basis of our specialty: value-based pricing. For more information on the topic, feel free to read our blog discussing the subject: Value-Based Pricing.
For me, it's not about price. It's about necessity, quality, and usefulness. Like, I have my Wet N Wild 666 lip liner. It's 99 cents and always has been. I started using it when I was in high school, and it's great. - Fergie
photo credit: Walmart Corporate
Fergie follows up perfectly with what Warren Buffett said. You might not think of Fergie as a pricing diva (we see her as more of a musical genius, have you heard Fergalicious?!) but her thoughts here are on point. Pricing should based solely on how much value your customer finds in your product. Your customer doesn’t care about how much (or in this case how little) you spent developing your product and if you’re offering a unique product, you shouldn’t price based on how much your competitors are charging. Fergie seems to find a lot of value in her Wet N Wild 666 lip liner and would probably pay a lot more than 99 cents for a tube (we’d argue that this company is leaving money on the table). This is why we tend to shun cost-plus and competitor based pricing. If you want a more detailed look at the different types of pricing strategies, take a look at our blog: A Complete Guide to Pricing Strategy.
“The moment you make a mistake in pricing, you're eating into your reputation or your profits.” - Katharine Paine
photo credit: Adrien Sifre Photography
Katharine hit the nail on the head here. Pricing is the most critical component to maximizing your revenue. Harvard studies have found that a 1% improvement in your pricing can add up to 11% to your profits. With bad pricing, you’re missing out on profits in every transaction that you make, not to mention the deals that you completely miss out on. Pricing is also a big factor in your branding and reputation. Prices that are too high can make you come off as arrogant, while prices that are too low can call the quality of your product into question (would you eat a steak that only costs $3?). More information on the this topic can be found here: 6 Myths About Pricing You Need to Debunk.
With the price of life these days, you've got to get everything for free you can. - Carl Rogers
photo credit: cobalt123
Carl here may be exaggerating a little bit, but his underlying message rings true. After all, who doesn’t love free stuff? This kind of thinking provides the foundation for the freemium model: Everyone loves free stuff, so let’s give the product away for free to attract users and then figure out a way how to get these users to pay. There’s a couple problems with this thinking. First, since you’re giving your product away for free, you’re implying that your customers will find no value from it (otherwise, you could charge something and they would be willing to pay). Second, and more importantly, you’re leaving money on the table because you're not collecting revenue from customers who were originally willing to pay for your product but are now using it for free. (When was the last time you had a customer volunteer to pay you?). Freemium kills pricing strategies, and for a deeper analysis, check out this article: Forget Freemium: Why it’s Killing Your Pricing Strategy.
"Pricing is actually pretty simple...Customers will not pay literally a penny more than the true value of the product." - Ron Johnson
photo credit: Sh4rp_i
We realize that former CEO Ron Johnson’s turnaround attempt at JCPenny wasn’t successful, but that doesn’t make his pricing advice any less valid. Great pricing is all about figuring out how much your customers value your product. Now, finding customer valuations isn’t as easy as Mr. Johnson claims, but we like to think of it more as a science than an art. If you’re interested in the process, we’ve created a general four-step process for determining customer valuations on our blog: Guide to Value-Based Pricing.
"Pricing is the exchange rate you put on all the tangible and intangible aspects of your business. Value for cash." - Patrick Campbell
The last quote is from Patrick our CEO (before you ask, no I didn’t include this for brownie points). This captures the essence of why pricing is critical to all sorts of businesses. You spend all that time, energy, and money developing your product and in the end, pricing is the only means that you can use to convey all of your efforts, like an exchange rate. Yet, in many companies, pricing is overlooked or just guessed at. Don’t shortchange your efforts developing and producing your product by ineffectively pricing it; put some real thought into how much value you think you’ve created for your customers. A deeper dive into this topic can be found here: Two Reasons Why Pricing is the Most Important Aspect of Your Business.
Of course these quick soundbites can't capture all of the intricacies of pricing. But together, they do give you a sense of the essence of great pricing strategy. Feel free to post your favorite quotes or thoughts about pricing in the comments.