Target customer: More money than sense

There are two interesting pricing strategies for us in the entrepreneurship class at university: one is cost-plus (the cost of production plus some sort of fixed margin. This is used for commodities and in industries that have high competition and little variation in quality). Then there is value based pricing (the perceived value to the user is taken into account, regardless of the actual price of production).

Value based pricing is particularly interesting in when it comes to marketing and sales of items that hold little value in themselves. What happens when there are too many players in the market or when some product becomes too generic is that people invent new values and attach them to their product by marketing.

I added the red arrows. Click to enlarge
 to see the difference in price.

A nice example of this is Moleskin notebooks. In essence, they are bound paper with or without lines. Some of them have other features like calendars. It is the added value that you pay for when you buy this little book for $40. Other notebooks of the same size cost $2. So what do you get, since you paid $38 more than the other guy? One would expect better binding. A nice cover perhaps? The rest is in your head: exclusivity ("look at me poor man, I'm fucking rich!"), luxury ("I'm worth it") and a few other things.

Usually people can't justify a rise in price unless there is some discernible change in quality. I mean we aren't complete fools right? We aren't going to pay more just to think that we are somehow cooler than the rest... right? Wrong.

Iittala is a brand from Finland that has taken it in its stride that all consumers are foolish enough and they are going to make them pay a fee to prove it. The company makes candle holders for tea lights, as well as various other home wares.

I admit that their goods are somewhat stylish and nice, but I really laugh about their pricing strategy because it has been so damned successful for them. In Sweden, almost every house that I've been to has at least one of these. Even the house we rent has two of them.

I added the red arrows. Click to enlarge
 to see the difference in price.

I've added some photos here to exemplify my point about their pricing strategy. Just so you know, there is no difference in size or weight or quality between the different colours. There is simply a new colour. Really. Take a look at the prices. At the time of writing, 100 SEK = €11.49 = AU$15.44.

Evidently this price strategy works because people go to each other's houses and look at the decorations and think to themselves "Oh I don't have the red colour in my Iittala candle holders" then they go home and nag their partner until they give in and fork out hundreds, if not thousands of kronor on these pieces of coloured glass.

If anyone cares to (dis)agree with this, feel free to comment, but more importantly, give me more examples of this please!