Confessions of the Pricing Man: How Price Affects Everything

A business therefore shouldn’t base its prices on markups it thinks customers will deem reasonable. It should instead base them on the customers’ perceptions of the value provided.

“If I gave you a treasure map, would you complain that it was only one page long?” It turned out the joke was on me. All of us place a subjective value on goods or services that may not relate to what they “should” be. Just as what we want and what we say we want aren’t always the same thing, the way we place a value on something isn’t always ratio

In my conversations with executives, I regularly meet managers who describe their products and services as being commoditized; there is no way to raise customer WTP. (I confess I am usually skeptical. I never quite know if “commoditization” reflects an incontrovertible industry fact or a lack of imagination.)

The ingredients of the solution are intrinsically familiar. We need to rethink our relationship to prices. The price of something is principally determined by what it cost to make, not how much human value is potentially to be derived from it.