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Price is important to consumers not just because it determines whether they can afford to purchase that purse or patio set. The cost of an item sets the buyer's expectations as to how the product or service will perform and what kind of prestige will be conveyed. As Warren Buffett says, "Price is what you pay. Value is what you get."
For makers of that product, the price will help determine the target audience, help define marketing strategy, and, ultimately, decide whether the company makes money.
In other words, pricing is a vitally important skill, but it remains something of a hidden art, more touch and feel than calculation and science. Maybe that's why it has been a favorite area of study for many researchers at Harvard Business School over the years. Here is a sampling of their insights and findings.
When a company sets a price for a product, shoppers typically have no idea what it costs to produce that item. But it turns out that consumers reward efforts to lay out these figures—to deconstruct the price tag.
Seven Tips for Managing Price Increases
How marketers can cope with consumer sticker shock.
Is Performance-Based Pricing the Right Price for You?
Not every industry or company can benefit from performance-based pricing. But where there is a fit, PBP can be a powerful tool that merges the interests of buyers and sellers.
How Our Brain Determines if the Product is Worth the Price
Are consumers more likely to buy if they see the price before they see the product, or vice versa? Brain scans of shoppers tell the tale.
Is it worthwhile for retailers to experiment with "pay what you want" pricing? Here is the surprising logic behind how much customers will pay, and when.
Should Retailers Match Their Own Prices Online and in Stores?
For multichannel retailers, pricing strategy can be difficult to execute and confusing to shoppers. Research offers alternative approaches to getting the price right.
How Would You Price One of the World's Great Watches?
For companies with lots of innovation stuffed in their products, getting the price right is a crucial decision. Here's how watchmaker A. Lange & Söhne puts a price on its 173-year-old craftsmanship.
What do you think of this research?
How much does price determine whether you will purchase an item? Give us your insights below.
