- How to influence price expectations rather than react to them.
- When "price sensitivity" is actually a response to poor pricing policies.
- The myth that customers understand the value of what they're buying.
Traditional pricing methods involve a trade-off. You want to charge as much as you can in order to maximize profits, but not so much that there is a negative impact on sales. So when a customer rejects your price, does it mean that the price is too high? Maybe not, says Tom Nagle. Price levels are only the visible "tip of the iceberg" in pricing strategy.
Nagle explains that in order to get customers to pay for value, you have to do more than just set a value-based price. You must proactively manage your markets with communications that justify your price in terms of value. You need to offer service packages that customers recognize as providing extra value. And you need to manage a price structure that tracks with value, and a pricing process that forces customers to acknowledge value with their pocketbooks.
Tom Nagle is the author of the seminal work "The Strategy and Tactics of Pricing." Now in its fourth edition, this book continues to be a best-seller in both the academic and professional marketplaces. Dr. Nagle has been a professor of marketing and strategy at the University of Chicago and Boston University. He is a graduate of Penn State University and received his PhD from UCLA.