4 ms·

Is it? I don't mean that facetiously. If you and I are both selling the same product and you spend more on marketing, does that mean you can raise your price th

by imh 9y ago

Is it? I don't mean that facetiously. If you and I are both selling the same product and you spend more on marketing, does that mean you can raise your price that much more, or is it just a little, where the primary spending comes at the expense of your margins? I'm sure it differs case by case, but I would naively expect the latter is more common if you have competitors.

philipodonnell 9y ago
People in tech tend to look down on MBAs, but these are the kind of pricing decisions you learn how to make. It depends on your brand strategy, the strategies of competing brands, the anticipated lift, your margins, your assumptions about the margins of your competitors, the advertising channels available, your ability to enforce pricing discrimination (the innocous version), the macroeconomic environment... And on and on. There's never a right answer to "am I charging the best price", it's always a guess.
- manmal 9y ago
  Sure, but are the MBAs really good at this, or are they not also just winging it, finding the right strategies via hit and miss? I don’t look down on them, but find them full of strange ideas and dogma that falls apart when tested in real world situations. (Just my n=1 observation, and I probably have it all wrong)
  - philipodonnell 9y ago
    In any discrete instance it may seem like that, but what you interpret as "strange ideas and dogma that falls apart when tested in real world situations" to a practitioner is a history of different approaches to a problem that have been tried in the past, a few standard ones that are sort of your go-to, and a huge amount of case studies and research about why different approaches worked or not and what might make it work or not again in the future. The problem always is that it very difficult for an observer to tell the difference between an educated guess and just a, like, regular guess. So I don't fault anyone for interpreting it like that.
jstarfish 9y ago
It depends on the industry. When I was shopping for lawyers, not that it was a consideration in my evaluations but I found that lawyers I recognized from subway or daytime TV ads were considerably more expensive than random selections from the phonebook. Their ads project images where you've been victimized, and you need a legal gladiator, willing to fight the evil empire to get all that settlement money that rightfully belongs to you. I found that the service was better with the random selects-- free consultations, quicker responses to inquiries, more services rendered, better aftercare, etc. Dentistry is the same. I've noticed a lot of billboards for dental services around my area. Most of them evoke Fisher-Price colors and softness, playing up to peoples' fears in how the experience doesn't have to be scary or painful. But when I did the legwork for quotes on significant dental work, I found that those that offices which advertised were much more expensive than random Yelp selections. The quotes varied by thousands of dollars for the same work. Auto repair does things slightly differently. I live in a small town and don't have much choice in this space, but for lack of time I recently took a vehicle to a shop that bought ad placements simply because aside from that their reputation in town was better. Their quote was fair and accurate given the job and they did the work without playing any games or breaking anything else. But then they tried to upsell me on additional services (fluid changes, etc.) at absolutely obscene prices. Since auto ownership is a cargo cult where nobody knows even the basics of what goes into making them work, I'm sure this tactic works on plenty of other rubes. Similar story-- I had a car break down on the side of the road on a long road trip. AAA towed it to the nearest repair shop, which happened to be a dealership (dealerships generally spend mad money on ads, and already have reputations for being overpriced). I know the failed part cost less than $300 and would take less than an hour to put in. They must have seen the out-of-state plates and the after-hours dropoff and banked on my presumed desperation and ignorance because their quote was $6000. I said no, had it towed to another garage and got it done for $450. The presumption is that consumers don't (or in some cases, literally can't) shop around, are generally unintelligent and are easily swayed by appeals to emotion, so you play to these factors and charge as much as you can get away with-- not some paltry "(cost of goods + cost of labor + cost of advertising) + 10% markup" silliness. My rule of thumb is that anything you see advertised is a sign of a hustle. If you don't know how the hustle works, you'll get got. This applies doubly so for anything marketed to the poor or minorities.

by imh 9y ago

philipodonnell 9y ago

People in tech tend to look down on MBAs, but these are the kind of pricing decisions you learn how to make. It depends on your brand strategy, the strategies of competing brands, the anticipated lift, your margins, your assumptions about the margins of your competitors, the advertising channels available, your ability to enforce pricing discrimination (the innocous version), the macroeconomic environment... And on and on. There's never a right answer to "am I charging the best price", it's always a guess.

manmal 9y ago
Sure, but are the MBAs really good at this, or are they not also just winging it, finding the right strategies via hit and miss? I don’t look down on them, but find them full of strange ideas and dogma that falls apart when tested in real world situations. (Just my n=1 observation, and I probably have it all wrong)
- philipodonnell 9y ago
  In any discrete instance it may seem like that, but what you interpret as "strange ideas and dogma that falls apart when tested in real world situations" to a practitioner is a history of different approaches to a problem that have been tried in the past, a few standard ones that are sort of your go-to, and a huge amount of case studies and research about why different approaches worked or not and what might make it work or not again in the future. The problem always is that it very difficult for an observer to tell the difference between an educated guess and just a, like, regular guess. So I don't fault anyone for interpreting it like that.

jstarfish 9y ago

It depends on the industry. When I was shopping for lawyers, not that it was a consideration in my evaluations but I found that lawyers I recognized from subway or daytime TV ads were considerably more expensive than random selections from the phonebook. Their ads project images where you've been victimized, and you need a legal gladiator, willing to fight the evil empire to get all that settlement money that rightfully belongs to you. I found that the service was better with the random selects-- free consultations, quicker responses to inquiries, more services rendered, better aftercare, etc. Dentistry is the same. I've noticed a lot of billboards for dental services around my area. Most of them evoke Fisher-Price colors and softness, playing up to peoples' fears in how the experience doesn't have to be scary or painful. But when I did the legwork for quotes on significant dental work, I found that those that offices which advertised were much more expensive than random Yelp selections. The quotes varied by thousands of dollars for the same work. Auto repair does things slightly differently. I live in a small town and don't have much choice in this space, but for lack of time I recently took a vehicle to a shop that bought ad placements simply because aside from that their reputation in town was better. Their quote was fair and accurate given the job and they did the work without playing any games or breaking anything else. But then they tried to upsell me on additional services (fluid changes, etc.) at absolutely obscene prices. Since auto ownership is a cargo cult where nobody knows even the basics of what goes into making them work, I'm sure this tactic works on plenty of other rubes. Similar story-- I had a car break down on the side of the road on a long road trip. AAA towed it to the nearest repair shop, which happened to be a dealership (dealerships generally spend mad money on ads, and already have reputations for being overpriced). I know the failed part cost less than $300 and would take less than an hour to put in. They must have seen the out-of-state plates and the after-hours dropoff and banked on my presumed desperation and ignorance because their quote was $6000. I said no, had it towed to another garage and got it done for $450. The presumption is that consumers don't (or in some cases, literally can't) shop around, are generally unintelligent and are easily swayed by appeals to emotion, so you play to these factors and charge as much as you can get away with-- not some paltry "(cost of goods + cost of labor + cost of advertising) + 10% markup" silliness. My rule of thumb is that anything you see advertised is a sign of a hustle. If you don't know how the hustle works, you'll get got. This applies doubly so for anything marketed to the poor or minorities.