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Why These 5 Pricing Practices Are Bad

It’s no secret that I strongly discourage some widespread pricing practices:

– Formatting your pricing to be easily comparable
– Cost-based pricing, including hourly-based
– Following industry pricing standards
– Giving volume-based discounts
– .99 pricing

One could say that people used them for centuries, orstill do in millions of transactions, so they obviously have at least some merit. So why shouldn’t I as well?

Because, while all of the above makes sense for “search goods”, what you provide are, by-and-large “experience goods“. In a nutshell, the value of a search good can be evaluated before purchase, while experience goods need to be consumed (experienced) in order to appreciate them.

And people

In other words, services based on expertise act more like a bespoke tailored suit than a Trump Halloween costume. The value of the former can be known only by trying it, unlike the latter.

Using a spoon to hammer in a nail is a bad experience, and eating soup with a hammer is even worse – but that doesn’t mean either of those tools is useless in general.**

Skipping all those practices is not only fair to the client, it would actually be damaging for your business if you had to use them. You can offer other things, like customization, exclusivity, or 1-on-1 service.

This is why copying other people’s pricing practices is so bad – the context of a price completely changes everything.

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