Why a logical product lineup may not be the most profitable
When marketers plan a company’s product offerings, they usually try to do so in the most logical way possible. Several levels of product may be offered - a stripped-down, basic version, a more capable better version, and perhaps a “best” version. These would normally be priced at quite different levels, probably based in part on the relative manufacturing costs of the products.
In one of my most-read posts, Decoy Marketing, I described research that showed how a seemingly irrational pricing strategy, i.e., pricing an inferior product either the same or almost the same as a better one, could boost sales of the better product by making it look like a bargain. (In that case, the inferior product is the decoy.)
Now, let’s look at a different kind of decoy: a new high-end product that, even if it sells poorly, can boost sales of the next product in the lineup. Stanford Business describes how this can work:
Customers frequently don’t know the value of products and must rely on comparisons set up by the retailer to determine if an offer is “a good buy.” Williams-Sonoma, a San Francisco mail-order and retail business, used to offer one $275 home bread maker. Later, a second bread maker, which had similar features except for its larger size, was added. The new item was priced more than 50 percent higher than the original. Not many of the new, relatively overpriced items sold, but sales of the cheaper bread maker almost doubled. [From Stanford Business - The Limits of One-to-One Marketing by Barbara Buell.]
by: Roger Dooley
Posted by: Loïc LAMY
Posted on: levidepoches.fr/contagiousideas
Source: FutureLab
