why do we fall for product pricing?
I think it is ridiculous that we put up with prices on certain products. For example, a decent, comfortable chaise lounge to go by a pool will be over 00. Yah seriously, for some bended metal and a cushion… 00. But then you can go to Wal-Mart and get pretty decent bicycle with front and rear suspension and disk brakes for 0. Yah seriously, 0 for forged metal, rubber, spokes, machined gears, hydraulics, springs, seat cushions, levers, etc etc etc.
That is one example of thousands!
So why is that so many things are inconsistently priced? Supply and demand? That can’t be it. I think it is stupid purchasing. Quit buying crap that is over-priced, and the demand will go down, and we can start paying legit prices for stuff.
One Response
Justin
10 Feb 2010
A few different elements are in play here:
-Inflation rises the costs of goods overtime by about 3-4% a year in the US. Using our good old rule of 72, that means prices double every 18 – 24 years.
-Supply/demand could have an element with it, but I think it’s pretty small.
-You’ve actually hit on something really important in business today. Essentially there are two sides that argue: Intrinsic value, and consumer willingness to pay.
Intrinsic value is what you’re advocating, that forged metal, rubber, spokes etc are not worth $200 on a cost basis (though, actually Walmart typically only ends with 3% profit on its sales, so that’s about as close to intrinsic value as possible – remember you’re paying for Walmart’s overhead, the supplier’s costs and overhead, supplier’s profits, transportation, and marketing in that item).
Consumer willingness is when you look at things like Coach purses or your chaise lounge. This school says "Well the customer is willing to pay for it so it must be worth this much!" A Coach purse is leather, a couple of gimmicky things, and maybe a working buckle. Intrinsically it’s not worth $350+, but the consumer will pay for it for the social implications, reaching that "ideal" self, and a ton of other reasons.
You’re absolutely correct to point out that if people stopped spending outrageous prices the price would fall, but many people want to be able to feel good about being able to purchase something outrageously priced, even if those Blahniks cost them 5% of their take home income. Doesn’t make sense to me, but there you have it.
I don’t think it’s so much falling for product pricing as it is willingness to spend without restraint, but that’s a whole different conversation.