I’ve written a lot about pricing over the years, I recent got a request to explain how a company can raise prices without seeming to do so. My first reaction was that I would prefer not to popularize such methods, but on second thought, I figured it was a public service to warn people about how they’re being secretly short-changed.
A word of warning: it’s almost always a bad idea to pull a fast one on your customers, unless they are gullible and stupid. While there is no shortage of gullible, stupid people in the US, don’t be surprised if your smarter customers see through these ploys, resent them, and take their business elsewhere.
1. Keep the same price but provide less product.
This classic approach for stealth price hiking was pioneered by consumer food product companies. For example, a bag of potato chips might have a big banner saying “same low price” when in fact there are fewer potato chips, by weight, then in the previous packaging. The gullible customer thinks they’re getting a deal when in fact they’re paying more for less.
Another way common way to provide less product for the same amount of money is lower your manufacturing quality, typically through outsourcing. One sad example of this is the Etch-a-Sketch, originally manufactured in Ohio as a high quality toy, but which now (based on the one’s I’ve handled recently) is barely functional.
A more subtle form of providing less product for the same money is to skimp on customer support. As anyone who’s tried to deal with customer service in the telecom and airline industries, it becomes more difficult every year to get through to a human being. Instead, you’re looped into automated such that are worse than useless. Since the customer, when purchasing, assumes that adequate customers support is built into the purchase price skimping on support is a price increase that’s not immediately visible.
2. Overcharge for add-ons that everyone wants or needs.
Burger King, I think, is the best example of this. The posted price is for a burger without cheese, and the order taker is trained to ask “do you want cheese on that.” Because almost everybody wants cheese on their burger, they say yes, thinking that the cheese can’t be all that expensive. In fact, Burger King adds $.50–a charge that’s not broken out on the printed receipt.
The airline industry is famous for this sort of thing. They advertise low online prices and then charge extra for everything except your seat and the stale cabin air.
3. Offer “everyday discounts.”
This is the go-to pricing strategy in the furniture industry. Furniture outlets try to make it look like everything you’re buying is discounted, when in fact nobody has ever purchased those items at the list price. Because everything is “discounted” you can raise the actual selling price but keep the list price the same, and still make it look as if the customer is getting a great deal.
4. Switch from discrete pricing to subscription pricing.
The software industry has embraced this strategy big-time. Successive versions of a software product usually have diminishing returns, due to feature bloat and awkward original designs that reach the steady state where fixing one bug creates another.
This became a big problem for Microsoft when its Office suite of products achieved maximum usability in the early aughts. Because there was no reason for anyone to purchase, say, a new version of Excel, Microsoft moved Office to a subscription model where the monthly fee seems low (compared to the old upgrades) but where you eventually end up paying a LOT more.
The automobile industry, of course, has been doing this for years. Car dealerships make more money when they lease cars than when they sell those cars outright.
5. Automatic add-ons unless the customer opts out.
This particularly scummy and scammy technique is most commonly found on pay porn sites and Trump campaign sites. They hide the opt-out for add-on product or subscription somewhere on the checkout page where a customer is unlikely to notice it.
With porn sites, the opt-out method is used to automatically sign porn consumers up for unrelated pay sites. With the Trump campaign, the hard-to-find opt-out, if unchecked, turned one-time donations into a monthly or even weekly automatic withdrawals.
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