When thinking about the concept of increasing prices, the company that comes to mind for me is Teenage Engineering, the Stockholm based design company most famous for their OP-1 synth/sampler. For example, both OP-1 and OD-11 (wireless speakers) have more or less been doubled in price over the years, and when they release new products such as their computer case Computer-1 and their portable speaker OB-4, there’s an endless outcry on different social media platforms and forums that the prices are ridiculous. That might be true for many people, but in the end, new products often are sold-out pretty much immediately, so there’s obviously enough people willing to pay these prices at the rate they’re able to produce them.<p>For me, this is a sign of a healthy price setting culture within a company. If there are people who are willing to pay much more than me, I wouldn’t want the products priced at my level. Let these people part with their money first, making me relatively richer than them and enriching the company who can put the money towards creating even better products that I eventually can scoop up on the second hand market for the same price I’ll be able to resell it for. The alternative is to keep the prices down, effectively creating some kind of lottery with regard to who happen to check their e-mail when a new batch is released.<p>This might have been a bit of a rambling, but in the end, I just want to say that I, as a consumer, wish that more companies would try to maximize their profits when it comes to pricing and that they should go against the sentiment that it’s somehow greedy to do so.
<i>Customers’ willingness to pay signals how much they value a product or feature.</i><p>I'd change that very slightly. It's not their <i>willingness</i> to pay, but their cold, hard cash that signals how much they value the product. Many, many people will say they're willing to pay for a product before you build it, and they really are, but won't actually pay for it when it comes time to sign up because they either no longer have the need, or the product isn't actually a good fit, or they can't afford it, etc. You can't really believe any signal except the money going into your bank.
> <i>Price increases on existing customers are pure margin.</i><p>Don't do this. Grandfather your old customers. Of course, it depends on the kind of business. But in B2C, customers can be price-sensitize and they don't (rightly so) understand why they should pay more for the same value they receive from a product.<p>> <i>Now let’s assume we increase average prices by just 10% without losing any customers.</i><p>I chuckled.
In economics, this is called demand estimation. There is a gigantic empirical literature on how to do it right under a wide variety of assumptions.<p>It is practiced in industry at Amazon and Microsoft among other places.<p>Price discrimination comes in three forms and is discussed in any textbook on industrial organization.<p>There is a lot of good theory AND empirical work for anyone interested in applying these techniques.
When new freelancers ask how much they should charge, the answer is always "as much as you can get away with". In my experience, competing on price gets you the stingiest penny pinchers.<p>However, if your customers are the product (advertising, affiliate marketing), then you should squeeze your advertisers more, not your customers. So many content creators ruin their hard work by going too hard with monetising their users.
I having full-time dedicated pricing experts on payroll makes sense as a rare thing.<p>(1) When pricing is hidden, this means in practice you have every sales rep trying to maximize pricing for the individual person. Meaning there are in fact millions of "pricing people" in companies around the world.<p>(2) When pricing is NOT hidden, pricing is rarely updated, which is a good thing. Ads, comparisons, press releases, etc all may reference pricing. Changing pricing on your existing customers really can cause churn (which for SAAS outweighs the typical margin gain).<p>(3) The author doesn't mention discounting, which is in fact playing with pricing, and something companies do a lot of.<p>(4) For transparent pricing, finding the right price doesn't really change that much. So if you only have a few products, investing in a full time person seems like maybe they would be really busy for the first 1-12 months then...do nothing? You really probably need new products coming out regularly to justify someone dedicated to the role.