NYTimes: Why Surge Prices Make Us So Mad
With Richard Thaler winning the Nobel Prize of Economics this year, the New York Times has a very interesting article on pricing. They make a few points very well:
- Customer's perception of price fairness evolves over time. But offending that perception can significantly harm one's brand
- It is not always about maximizing the profit from a single transaction. Home Depot builds a trust relationship by NOT increasing prices during an emergency. Rock bands may be keeping concert prices low to avoid giving an impression of gouging their loyal fans.
- Price changes can damage your brand. Knowing others at an event got a last minute discount can feel unfair.
- Dynamic pricing to "smooth demand" is pretty well accepted. Examples from Uber, road tolls and electricity.
Of course dynamic pricing can be used to segment customer demand (airlines being the classic example). The article also highlights how pricing strategy and execution needs to reflect a company's goals and the trade-offs the strategy inevitably embeds.
Overall a good read!