Yes, but this kind of anchoring is "artificially" manipulative. It's possible you convince a customer to accept a higher price at first, but pretty soon buyer's remorse will set in and you're screwed.
I do believe you want to pick "valid" anchors and sometimes be more selective (as-in the iPad case) but the comparison has to stick.
Not necessarily. Take our case of the iPad. It came out at a time when netbooks had created a new low for computer pricing. The iPad lacked a keyboard, a proper/large HDD, had a processor that was even slower, ran a smartphone OS that couldn't even multi-task properly, and had a screen resolution right out of 1995. The 'logical' price for this would have been $200-300; pretty much the only hardware that was not a cost reduction on a netbook was the (low cost) touch layer. Yet it had excellent customer satisfaction. They created perceived value- lacking USB, storage expansion and replaceable battery were all practical disadvantages-- but these weren't things that created desire like the buttery-smooth operation provided by the GPU and capacitive touch, the large viewing angle from the IPS screen, the sleekness from having just one button etc, and the light and slimness gained by forgoing so many features available in even a netbook.
And it's not just something like apple does. Think of a tech 'consultant', or a fashionable web-design company. Chances are you see their prices and think 'WTF are they smoking'..I could have better than that done for me for 10x less. but their clients, i bet are pretty happy. Because of the value they offer-- some perceived, some reality.
In the next post, I'll cover my approach to not only how to test price with customers, but how to get them to want to pay.
Yes, pricing is a conversation but you need to lead the conversation because if you pause and think about it, there is no rational justification for your customer to offer you a fair price.
They are either clueless on value and don't know
OR
they'll low-ball you because they want a good deal.
"The fair price for your product is usually higher than what both you and the customer think".
I'd disagree and say with wine you'd have to explain a lot more (as you did). We know from the existing bottled water market (in the U.S.) that a viable market exists at both $0.50 and $2.00. $2 might be a ripoff to you but it's what some customers always purchase which leads to Principle 2.
I live in Arizona. I don't know of anyone buying $2-$3 water because of the quality, mostly we buy it due to convenience. In short, because it's 116 F and they want water right now.
Sure, maybe there's Evian or whatever, but at least for me, it's well outside of my normal experience. Most of the expensive water we buy is pure convenience, because we'll buy from the guy with $2 water instead of $3 without thinking, given the chance and all the common brands are blurred together (Evian is really the only one that sticks out).
So... yeah. I'll agree that it's a proper example, it's just not something where quality is a major consideration, at least in these parts. YMMV.
I live in Arizona also, and I know people who would swear on a stack bibles that <insert brand> tastes better. Despite repeatedly explaining to them that it is filtered tap water, and showing it to them on the label where it says "filtered tap water" , they insist. In any convenience store there are multiple brands of water at multiple price points, each with their own fans. weird.
Discount Tire also uses the good-better-best philosophy, with the middle choice being most popular.
The brilliance is picked an externally accredited source (pundits) for a product twice in price. Another alternative was positioning the iPad as a better (bigger iPhone) but that obviously would not have worked as well.
Its fascinating. These 'pundits', lets remember (beside the question of whether it was even accurate or significant-- enough pundits and someone will have said anything), we didn't know what the iPad was going to be. The possibility that it would be a powerful, fully-fledged OSX running computer was considered very real (remember the slamming people gave it as just a big iPhone).. if the question had been 'what do you think we will charge for our iPod touch with a bigger screen', not even the most hardcore apple pundit would have said '<$1k'.
Then he lingers on this issue-- talking about how much they have accomplished for the price-- almost making a value proposition for it at $999. After about a minute of $999 up on the screen he announces that '[apple] have met our cost goals'. I think this phrasing is very interesting-- he doesn't say 'we have beaten our goals', 'met our aggressive goals' or 'achieved a low cost'-- nothing to remove from the perception that it could be $999. At the point at which your expectation is highest that he is going to announce that the goal they met was a $999 ipad, and he has built tension, they dramatically drop in the real price.
Even the fact that they managed to manipulate their audience is in turn a suggestive indicator that this is great value, a shock, at this price. This can have a big effect when you consider that the press are not immune from this manipulation-- who then present this device as highly desirable and of great value.
The context here is for products where one would sell a product or service directly to customers e.g. SaaS, enterprise. Crowd-sourcing is a different model. So are multi-sided and marketplace models.
Customer development is not billed as a customer acquisition strategy but there is an implicit expectation that because "customers hold all the answers", cust dev will reveal the path to customers.
I don't believe customers hold all the answers and the point of this post is that you can't be complacent about finding and testing that path to customers.
I agree that the idea that "customers hold all the answers" is flawed, but that's not what customer development is. A better phrase would be "no answers are found inside the building". You can't just ask people what they need and build it, that's not customer development. Customer development is about finding a problem worth solving and that people are willing to pay for. You need to understand the problem thoroughly, and that requires you to get out of the building and talk to lots of people. If the solution was obvious, and the people you talked to told you what to build, then you wouldn't have much of a business, because the problem would be easy to solve (and someone would have solved it, or they'd do it in house).
Customers don't hold all the answers, but they can point you to the right solution. You still need to come up with an optimal solution. Once you reach product-market fit, then you can work on optimizing customer acquisition. Before product-market fit, you don't know what your product really is or who your customers really are. Any time spent optimizing that is time that could be better spent finding the actual problem and getting to product-market fit. At best you risk wasting time, at worst you risk following the wrong path because you've invested so much time optimizing it, which would make pivoting to the "right" product/market much more difficult.
