Inexpensive = Piece of Junk; Expensive = Valuable

Company B is really ambitious, but I think company A can get more sales.. by the way it depends on the product, you are talking about a home cleaning product so in this case is not a piece of junk because of being affordble. But if you were talking about cars then yes, expensive = valuable

Company B makes more money with less sells. It is just as easy to sell an item for $100 then it is $1. Company a has A to make 5 sell to match company b's 1 sell.

Nothing more than a Marketing strategy. Depending on who you are targeting and your location the price point can vary drastically.


CHAD

Boy oh boy, I have a friend who works in home audio and the stories he could tell you.

He made an ultra lightweight, efficient speaker system and tried selling it for 300 bucks - only saw profit when he added a zero to the exact same product.

Only if they're selling it on the highway.

With no information other than that provided in your initial post, in which company would you yourself want to buy a small stockholding, company A or company B?

It's called premium/prestige pricing. People do it all the time.

This is classic marketing at it's core.

That's the beauty of a free market. Ultimately it will be the market, or the mass of people buying from Company B, that will decide whether they are charging appropriately.

Solving the formula of balancing the mass perceived value with the maximum price people are willing to pay will yield you the most sustainable long term income.

Cheap in price is never a bad thing... These 2 companies are obviously going after different segments of the market. Maybe that's the only way Company 'B' felt it could compete?

Maybe Company 'A' has the market locked up tight at that dollar value and it would take a lot more effort, marketing and money to beat them so Company 'B' simply went and serviced a completely different segment of the market where the customers there equate Value and quality with the amount of money they spend.

They aren't the exact same product if they have different lables.

This is nothing new. Some companies have sold their own products under different names -- same thing in the package -- for as long as I can remember.

Same with a short wave radio bought. The model I bought from Radio Shack was $150. Another company with a high end name sells the exact same model with a different name plate for $300. Same radio made by the same company, double the price. It pays to do your research on electronics.

The point is not the price but the margin. If you want to make money out of your initial investment in 10 or 20 years from now, you Have to Have a large enough margin. So if the cost of a car is $1000 and you sell it for $1300, you won't be here in a year (that's for sure ) If on the other hand your car costs $1700 to produce but you sell it for $4500 (just going the extra mile with the R&D) - you will be there in 10-20 years (or maybe not- don't blame me!) Anyway - you get the point - you have to justify your margin with the quality of your product and then the price doesn't really matter.

This happens in IM.

One person sells his stuff for $17 another $1997 - both sell the information for the same amount and both have happy customers.

This is common in most niches.

Its all about positioning your offer. Better marketers will increase perceive value and target the right market better, so can charge much more for the same offer. IT all comes down to good marketing.

I agree it is about the positioning, and that different markets tolerate different pricing. I am amazed at the deals I can get on WF.

Company B is taking advantage of customer ignorance. In no way, its robbing the customers. If the customer is not lazy and research oriented then he will find soon that company A is selling the same product at a much low price.


- Steve

Wow! Small question - big subject. I'll try to simplify.

There are many factors at play here:
Marketing. Company A has to advertise and promote to 10 times the number of customers, so their costs may be much higher.
Packaging and presentation. Assuming that the products both have identical packaging. A fancy box can give higher perceived value, and therefore command a better price.
Retailers credibility and image. A local bargain store will not have the same overheads as a major high street store, and thus doesn't have to cover high staffing/premises costs etc.
Repeat Business. If the retailer wants to sell higher cost items later, they may use the $20 ticket to attract customers, or build mailing list. However, if it's a one off sale, the higher ticket price could bring in much higher revenues.
Uniqueness. You can't use Apple Computers or Dyson vacuum cleaners as examples, because the products themselves command high value, and couldn't be undersold at cheap prices.
Market Forces. In an economic climate such as we have now, people are 'shopping around' more carefully, especially using the internet. If both A and B are marketed similarly, company A should logically outsell company B easily. Having said that, company B would still make sales as some people go the easiest route, and even may not trust the cheaper source. (Don't ask for statistics though).
Supply and demand. If there's a perceived scarcity for the product it could command a much higher price (remember the Telly Tubbies about ten years ago, and the Cabbage Patch Dolls before that).

Even in IM, I have come across identical products (with different names), selling at vastly different prices. One that springs to mind was marketed at $47 complete, and sold elsewhere at $297 on it's launch date. The vendor sold thousands at $297, due to excellent marketing. The same product was slightly modified a year later, and sold again at $197, then again at $97.

In answer to the question, no, I don't think company B is committing highway robbery. In a free market, any business will try to get the best price they can for any sales, which is fair enough. I think they're more likely to be around for a while than the cheap seller, company B.

Any thoughts?
Cheers

Alan

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It depends on the products & strategy which company is adopting in market to increase their sales & to promote their product. Company A & B are different & may be B is more powerful & strong, as compared to A. If A gets full chance, it can easily capture the potential market.