When a dollar isn’t worth a dollar
Today is our second Noodle event. The aim with Noodle was, is and will be to do something different: to run an event that provokes thought and helps to guide action, rather than promise quick fix solutions to perennial marketing problems affecting clients everywhere (if I had those, I wouldn’t be working at my desk today, but instead be on a yacht in the Adriatic). At Target McConnells, we’ve seen enough of the same thorny issues pop up again and again for us to realise that adland doesn’t have all the answers, and that marketing needs a new source. Unequivocal expertise in the form of academics, for this event and the last, has been our source.
Today’s talk is a take on how economists view pricing. Pricing has long puzzled marketing strategists. It’s arguably the least studied and understood part of the marketing mix. Very few price consulting agencies come to mind: there’s Inon, but in comparison to the amount of creative or media agencies…sheesh.
The conventional tactic is to look at what your rival does and see if you can go for a spread either side, depending on your required financial result. That strikes us as less than thorough. We’ve fought the temptation to just give a list of tips and tricks as there are armfuls of such guides out there on the web that a lazy Google trawl will yield. Instead, we asked Dr Kevin Denny, of UCD School of Economics and UCD Geary Institute, to set out a framework in which non-economists can begin to examine how they set prices.
With a scientific perspective we get mix of intuitive and counterintuitive results: the value to using the perspective, though, is we move beyond a slavish execution of the list of tips and tricks found onoine. We benefit instead from a reasoned account of why reason and unreason apply to pricing. We see that charm pricing (why €19.99 is a way more popular price level that €20) has a neuropsychological explanation to it in part, and that ticket touts are trying to identify consumer surplus in a way that many brands would love to have the freedom to do. We learn more about snob or Veblen goods, which on the face of it, shouldn’t work in economics. These are goods that are deliberately sold as being more expensive, when quality comparisons do not themselves alone explain the price gap between that good and its category rivals. Some people don’t want to keep up with the Joneses, they want to make sure that they don’t have what people like the Joneses have: they want to be by themselves at the upper end of the price line.
A blog post doesn’t do justice to Dr Denny’s talk – being an academic expert takes time and effort that can’t be bluffed by a turn of phrase. So, if you’d like to delve into the explanations of what determines a profitable pricing strategy, drop me a line at [email protected]
Dr Ken McKenzie