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Set the Best Price

Are your products or services priced correctly?

If your sales are slower than you expect, it could be that the price is too high. People will resist prices that they perceive to be too high, sometimes without even knowing it.

Movie theaters can sit empty. Used car lots can sit full. Inventories can create mountains as expectations whither in the wind, products obsolete themselves, and customers take new options.

But is there a price that people will buy?

My son Juan and I went to the movies to see the 4th Pirates of the Caribbean movie. It's an entertaining movie, but having seen the first three and considered the last just a little over-the-top, I could easily have skipped number four. But the theater we attended has a Tuesday night special ticket price of just $5. For a movie, that's good. We'd seen "Thor" a few days earlier and paid a whopping $13 a ticket (it was in 3D). For that showing of "Thor" there were maybe 12 people in the audience. I have to believe the theater lost money that night. But for "Pirates" and its $5 seats the theater was almost full. It looked profitable that night for me, and it was so much more fun to be in a larger audience.

One week Amazon sold the latest Lady Gaga album for just .99. People who might never have bought her music cheerfully downloaded the music. So many, that it crashed the system for a while. While crashing the system is not what leaders are looking for, sales and creating new customers is. Radiohead once let people set their own price -- and they ended selling a ton of downloads of "in rainbows". I remember paying a little less than it would have traditionally cost -- but I DID buy it.

Are your products or services priced correctly? What price point would optimize your number of customers AND profit margins?

-- Doug Smith

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