Pricing
Business
11 rabbit holes · 6 people exploring
Common starting questions
- Why didn't Coca-Cola raise its price for 70 years?
- Do .99 prices actually work?
- Do more options really make people less likely to choose?
- Did Gillette really give away the razor?
- Why do two people on the same flight pay wildly different prices?
Rabbit holes
- a Coke cost 5 cents for about 70 years
From 1886 to 1959. Part of it was an early bottling contract that locked in the syrup price, and part was vending machines that took a single nickel. Going to 6 cents meant asking for two coins.
Tomás Rinaldi · 6 sources
- haggling was normal until price tags, and dynamic pricing is bringing it back
For most of history you negotiated the price of almost everything. Fixed prices on tags spread with Quaker shopkeepers and then 19th century department stores. Now apps reprice constantly and it feels like haggling with a computer that knows more than you.
Tomás Rinaldi · 6 sources
- why everything costs $X.99
There's a popular story that odd prices were invented to make cashiers open the register and give change instead of pocketing a round-dollar sale. Fun, but nobody seems able to prove it. Left-digit bias is the part that holds up: $4.99 reads as 'four something'.
Tomás Rinaldi · 5 sources
- the decoy effect, and why it's weaker than the books say
The famous example: web-only subscription $59, print-only $125, print plus web $125. Nobody wants print-only, but its being there makes the bundle look like a steal.
Pete Lindgren · 5 sources
- American Airlines once sold unlimited first class for life
In 1981 American needed cash, so it sold lifetime unlimited passes for $250,000. A few buyers flew thousands of flights and the airline eventually decided it was losing a lot of money and started revoking passes.
Alistair Grant · 5 sources
- JCPenney tried honest pricing and customers hated it
In 2012 they dropped most of the coupons and constant sales and just charged a fair price up front. Sales fell hard, the CEO was out within about a year and a half, and the sales came back. Turns out a lot of people don't want a low price, they want to feel like they beat the price.
Tomás Rinaldi · 5 sources
- Goethe ran a second-price auction 160 years before it had a name
In a sealed-bid auction where the winner pays the second-highest bid, your best move is to bid exactly what it's worth to you. Goethe apparently used a version of this in 1797 to sell a manuscript to a publisher, with his minimum price sealed in an envelope.
Tomás Rinaldi · 6 sources
- the jam study: do more choices really make people buy less?
Lin Chen · 5 sources
- Gillette didn't actually give away razors to sell blades
Sofia Castro · 6 sources
- how American Airlines beat People Express with software
After deregulation, People Express sold cheap no-frills fares and grew like crazy. American's answer was a yield management system that could match those fares on just enough seats to fill the plane while still selling the rest at full price. People Express's founder later said they'd been profitable until American came after them with those fares.
Dev Malhotra · 6 sources
- why are diamonds expensive and water basically free?
Pete Lindgren · 7 sources