I've always thought it odd that pricing strategy is taught as part of marketing curriculum in colleges when in the real world, the finance department picks the price. Rather than teaching strategies behind setting prices, college professors would serve their students better by teaching them how to modify the perceptions of prices in customers' minds. Today, I present case in point - the $500 Denon computer cable.
I found this gem via The Register today, and I laughed out loud when I saw the price - although I'm not sure if my laugh was simply because of the 100+ scathing and hilarious reviews of the $500 cable on Amazon (you can read some of those by following the above link to The Register) or if it was a laugh of pain for the poor marketing department who has to try to make their numbers and sell enough of these things to get their bonuses this year.
So what can we learn from the $500 computer cable? Here are just a few points to take away from this:
- Set prices that you're able to create a perceived equity value for. In other words, you need to be able to convince customers that they're getting enough value for their money spent. You have to be able to meet your customers' expectations based on how much money they have to pay out of pocket for a product.
- Watch the competition. Is your cable the only one priced at $500? If so, it's time to adjust.
- The social web is powerful. The story of the $500 computer cable is making its way around the Internet. Already The Register, Boing Boing and ProductDose.com have written about it, and over 100 people have left less than positive reviews on Amazon about the product and price-value relationship. All of this negative buzz creates negative word-of-mouth and a PR blitz that will certainly not help sales.
I should also mention that I can't find this cable on Amazon anymore. I'm not sure if it was intentionally removed or not, but I did find it at Your Electronic Warehouse with the same $499 pricetag.
So what do you think? Are you going to buy the $500 cable? I'm guessing not.
Just to clarify, this isn't a computer cable. No computer geek in their right mind would pay $499 for 1.5 meter (59") cable, that's about $8.50 per inch by the way...
It's described on Denon's site as "designed for the audio enthusiast. Made from high purity copper wire and high performance connection parts, the AK-DL1 will bring out all the nuances in digital audio reproduction from any of our Denon DVD players with the Denon Link feature". I guess they're thinking that audio enthusiasts, much like some art enthusiasts can afford to toss away hundreds of dollars.
Posted by: Scott | June 26, 2008 4:46 AM | Permalink to Comment