Posts by: Kyle T. Westra
Middlemen make for an easy target for disgruntled customers and observers of the economy. At times it can be unclear how they are adding value to a transaction. Sometimes it looks like middlemen are simply inserting themselves into a transaction to increase costs and take a cut.
More In my upcoming book, preliminarily titled The New Invisible Hand, I’ll explore the most important technological trends affecting pricing and commercial strategy. One chapter will focus specifically on this issue: unpacking the promise and perils of dynamic pricing.
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Software is good at automating repeatable processes, but that doesn’t make them the right processes. Doing the wrong thing efficiently isn’t the same as doing the right thing. There’s a reason that Peter Drucker wrote about the effective, not the efficient, executive.
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On the other hand, getting people to open up their wallets and pay for a service, especially if they’ve become accustomed to using it for free, is hard. That’s true for pay-only services and it’s also true of the attempt to split the difference between free and paid: freemium.
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If you find yourself in this situation, reducing price can help to clear existing inventory but it will not solve the fundamental problem of lacking a product that people want. Better to preserve what profits you can and invest them into developing a product that addresses a customer need.
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Shortages can be signals of excitement, quality, even virtue. “Sold out” is a powerful story for the right kind of product. Musk’s goal isn’t optimizing his earnings from flamethrowers. His goal is building excitement and investment around his companies. Selling out a flamethrower, and even a hat, does that in a big way.
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Pricing is not only numbers, but strongly psychological and emotional. Certain norms emerge that dictate how products and services are sold in different industries. Customers come to expect those norms, whether or not they are necessarily the most economically efficient.
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Consultancies, he says, are focusing on lowering costs rather than driving value. “In any industry, when the basis of competition becomes efficiency versus innovation and new solutions, disruption lies on the horizon.”Innovating the World of Management Consulting
More Price bundling typically involves combining two or more discrete products with heterogeneous demand, with the demand for the bundle resulting in higher profits despite it effectively being a discount on each individual product.
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“Strategy consultant” is a job title that is can mean everything and nothing. It’s no surprise that people have trouble understanding what skills are necessary for a strategy consultant, let alone what the role even normally entails.
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