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Fixed Pricing

 

DisciplinesMarketing > Pricing > Fixed Pricing

Description | Example | Discussion | See also

 

Description

Define your price and then stick to it. Do not offer discounts or any other form of reduction. If customers threaten to go elsewhere, let them. If you have excess stock, destroy it rather than sell it off cheaply.

When people ask for a discount, give reasons why you will not reduce your price. Say your costs are high, that you are the best and worth it, that resale values are high, etc.

Example

A fashion house never reduces the prices of its couture range.

A salesperson talks up the product, showing that it is far better than competing products. Then they refuse to reduce the price, giving a story of high development costs, expensive materials and so on.

Discussion

Fixed prices work well in some situations and terribly in others, so do be careful to understand the effect of not moving your price.

Pricing includes messages. A fixed price sends a signal that the price is what the product is worth, while a discounted price suggests that the original price was too high. Fixed prices work well for luxury goods, where a high and unchanged price is a part of the 'exclusive' brand. Fixed prices work for cheap items where the cost is relatively low and there is little room for negotiation. Fixed pricing also works when you have a relative monopoly or where competitors do not reduce their prices either, so there is little reason for customers to try to get a discount.

Fixed pricing is less useful where there are market norms around discounting in any form, whether as bulk discount, negotiated price, price matching, bargain sales or other common situations where the price may be lowered. Market norms that prices are fixed often appear in retail situations where customers assume that the ticket price is what they must pay (when perhaps they could actually negotiate a lower price).

When you start discounting, customers learn that they can hold out for a lower price and may try to drive your price down so low your profit margin is damaged. Discounting can also lead to price wars with competitors such that you all suffer the profit damage of lower margins.

Fixed pricing may be a practical solution for small firms where the extra administration of discounts and price variations might make life more complex and could even require extra staff.

See also

Customer Price Thinking

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