Pricing Principles in other Areas

Interesting. I just read an article about congestion pricing. I had no idea that it was becoming that commonplace. Implementation aside, I wonder how well we can use this to drive behaviors.

Everybody knows promotions are meant to drive buying. Demand pricing is two-fold: it’s meant to either capitalize on the increase, or slow down the demand. Or both.

If we lower the price of an item in retail, it’s meant to increase the velocity. Whether that’s a markdown, promotion, or just a new strategy, that’s always the end goal. When a restaurant does a promo (3 course meal, free desert, 2-20, etc.) it is always meant to drive traffic and move specific items (which I hope are margin builders!) Elasticity 101.

I’m curious how well this applies in other areas. And at what point does it become a little too Orwellian? Do we make people pay to drive on certain lanes of the freeway? Well that’s been happening for 20 years now. Will people pay extra for better seat locations on the (same) airplanes? Also been a common practice for a little while. Even early boarding is a form of a surge price. And obviously Uber has been using this since day one.

If we watch behavior, can we modify it to achieve desired results? In the case of traffic, less cars, less traffic, less pollution. That’s a win.

Dynamic pricing in its infancy was awkward and inconvenient. But now it’s becoming so mainstream people don’t even blink about it- or better, don’t notice it. Maybe that will be the new model.

Is there a huge difference between event or surge pricing and premium pricing?

Was Pay-per-view on your television pretty much the beginning of the event based pricing? HBO? Extra sports channels on your TV? Also premium. When I was young, Mike Tyson fights were on HBO. That’s why you had it- and some movies. Now? All big fights are PPV. (I know, that dates me!)

Same question on NFL Sunday Ticket: it’s still DTV exclusive for a little longer. I don’t want to pay $400 for all the games, but I would be $25 for specific ones. Give me a menu, and price it based on MY behavior. I won’t pay 400, but DTV would get a little more revenue.

You wonder at some point if things will be truly a la cart and then pay a premium for premium channels and premium services. I’ve been hearing big cable TV talking about this for years.

What’s the next frontier going to be? And as a better question do we have the technology to drive this using AI? Is this the next best use case for AI in society?

Marry the price to the demand to the consumer then blend in personalized and targeted marketing. That would be hard to beat.


Aloha Friday, #DataNeds

-That Planning Guy

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