There are 3 stages of price setting:
- The process of setting the price.
- The price that is set.
- The selling of the price.
The Big Idea: Price is a complex decision that happens through 3 stages.
The new electric F-150 price shows us each of the levels.
Level 1: Setting the price:
- Price demands research
- The easiest way to set a price is pulling it out of thin air.
- The most common way: price plus.
Ford’s decision seems built off of price plus thinking. They talk about all the factors going into the price of their new electric F-150.
You can learn a lesson here: talking about all of the reasons you are changing the price can signal that you don’t believe in the value of your product. Or, you don’t think your market sees the value the way you need them to see it.
Both situations: not great.
Level 2: The price setting.
Setting the right price can include:
- Research
- Focus on value
- Experimentation
The lesson here: don’t just throw the price against the wall.
Level 3: Selling the price.
Most businesses fail here.
They may not build up the value. They may resort to discounts.
The right way to deliver your price:
- With a focus on value.
- With confidence.
- With knowledge that your product is worth it.
Go Deeper: Discounts are for dummies!