Using pricing to optimise income and access
Using pricing to optimise income and access
By
Tim Baker
Melanie Brooker
SUMMARY
If you're reviewing your approach to pricing then this article may prove useful. You'll find an expert introduction to pricing theory, including the influences on pricing, how to understand value and the variables you can use to differentiate prices. There's also a practical case study from City of Birmingham Symphony Orchestra (CBSO) which discusses the changes they made to their pricing system, what they learned and the impact their new implementation had.
In terms of pricing strategy, there are essentially only three approaches. Firstly there’s what we call ‘skim pricing’, which is basically setting higher prices than the market, in the knowledge that you’re appealing to a small sector, but a small sector who you know will pay. This is a high income, low yield model – charging high prices to a relatively limited market. Second is ‘penetration pricing’, which is the opposite of skim pricing, basically following the ‘pile it high, sell it cheap’ model.
