Thursday, 10 February 2011

Cheap seats don't sell

It could sometimes be noted that it's not the companies who are to blame for high prices, but the consumers them selfs. Since most people don't have any true understanding what things are worth, we go by the price. As I had mentioned in my earlier post, people more likely then not when presented with a choice will go for products that are in the middle price range.

This effect is so strong that sometimes retailers are practically forced to use in order to make a sale. Consider the following; when Williams-Sonoma first started selling bread-makers they had just one model retailing at $279. Sales were slow until a newer and bigger model went on sale for $429. No one bought the bigger version, but sure enough the original breadmaker suddenly looked cheap in comparison and the sales doubled.

In some cases whole brands have been built around this concept. How many $10,000 bags do you think Gucci or Burberry sells? Chances are that they've never sold a single one, but what it does do is make everything else in the shop look cheap. These brands will make majority of their revenue on scarves, perfumes and even keyrings.
$12,000 worth of leather
When I can afford it I like to go to a theater or the opera. Here they really don't have much choice in how they price the tickets. In fact this applies to sports events and music concerts too, and if you ask tickets sellers they will tell you that 'cheap seats don't sell'. If you sell tickets too cheap then everyone will think there is something wrong with the show and the house will be half empty. What's more, even if you don't sell your tickets at the premium price then you just send them off to discount stalls where the punters can get a 'great deal'.

This works so well that it's an industry standard and often up to 40% of all tickets end up at the discount stalls where they are quickly sold. The face value on the ticket is the anchor and it doesn't matter how much it is, because it is the "discount" that will draw in the punters.

18 comments:

  1. Is that purse... really 12,000? Jesus... Christ...

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  2. Sadly, you're right. Not very many people do a little research, find a solid product, then shop for the best price. Many people confuse "cheap" with "bad" and buy a few steps above that.

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  3. lol that doesnt look like 12000 worth of leather to me

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  4. At that kind of price it doesn't have to be good. It's not really for sale. Usually they will only give it to a celebrity so that they can promote it. Also main attraction here is the price tag, not style

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  5. Id take that 12000 and invest it in stocks and make enough for 2 purses.

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  6. yea whats the real value of the things we purchase? I always find myself thinking that buying the middle priced item is a bargain. how foolish

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  7. My mother has a Prada bag worth 8.000 dollars. It was a gift, but I once asked her "What if i snatch this prada logo off? The purse will automatically be like 7800 dollars cheaper"

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  8. The amazing thing is that i think that way......I don't like buying cheap because I think that there might be something wrong with the product....thanks for the info since it opened my eyes to things I didn't know....

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  9. whatever fills seats. i'm sure they just to support the arts by offering discount tickets. /sarcasm

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  10. This is why every company now just doubles the price and then puts a 50% off sticker on it. Look at phones, they make you think you get one at a huge discount when you but a plan.

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  11. I used to work doing quality control for a cleaning service and I'd go into peoples homes and see 10,000 bags sitting on kitchen counters all the time. Some people have so much money that a 10,000 bag is pennies. Trust me, Gucci sells MANY of those overpriced purses.

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  12. Hideous bag but the concept behind it is amazing. I'm starting to see all these things now that you mentioned it in this and that last post

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  13. Yes sadly this is the truth people are just to lazy to search for the best price and we all suffer for that

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  14. You have a good knowledge of economics :)

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