Thursday, November 29, 2012

Pricing - From Used Kites to Homes

I sold one of my used kites yesterday. I did it fast: posted it on the kite forums at 8am and took it to FedEx by noon. I probably sold it too cheap. Pricing can be such a challenge! But, at least for a used kite, I prefer to sell it cheap and fast than to spend weeks (or months) trying to sell it (for an extra $100). Sometimes, you can start with a high ask price then negotiate with lower offers (or proactively lower the price) but the risk is nobody will bother to make an offer - or pay attention when you lower the price. Sometimes you can start with a low price and let potential buyers bid the price up. That is the ideal outcome when selling a house: the low price attracts lots of interest but the scarcity generates bids that maximize the sale price. The risk there, of course, is that all you get are offers at the low price you asked for - but in that case that is probably the fair market value.

A completely different approach to pricing is utilized by airlines: they constantly change their ticket prices based on time, capacity, trends, etc. We've gotten used to the same product being sold to different people for radically different prices. This is something we normally don't accept. Imagine if Apple asked you $1,000 for an iPad because it knew you could afford it?

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