Riddle of the Month -- Pricing

How is a Sale in the Supermarket different than a Sale in the Stock Market?

Have you noticed the difference?  In the Retail Trade, when an item is put "on sale" at a lower cost, it stimulates a rush to purchase.

In the Stock Market as the price of a Stock is reduced, there are fewer buyers, only the adventurous.  For instance, at the beginning of the year 2000 when P&G Stock was selling at 37 times earnings ($112) everyone (well almost) was buying.  When the same stock was selling at 20 times earnings ($61) in November of the same year, there were few buyers.  Little had changed.  They had the same people (almost), production plants, brands, sales and profits.  Basically only the sale price has changed.

Is it because in the retail sale we see the reduction as temporary?  do we expect the price to revert to its original higher price?  Do we, at the same time, look at the price reduction of a Stock as an indication of damaged goods?  But what if there is no sign of damage, do we invest?

What lessons can be learned here about the selling of a Company (Stock), the Company's products, or even a Service?  The Service can be either a Company's service or your personal service.

Price is a signal sender.  Price is a motivator (for good or bad).  Do you know what message your prices are sending?  It is all about value perception.

A few thoughts for those who are looking at the pricing structure of their Company's products.  Pricing research as I have known it usually deals with the Price Elasticity Model but the method does not specify what type of research environment should be utilized with the method.  As usual I have strong feelings about the proper environment for assessing the pricing structure of consumer products.  I believe that it is most important to evaluate the price of brands in the environment where the actual purchase decision is made and in context to the consumer's options and the relevant prices.  That environment is in the store where the individual shoppers make their purchase decisions.  Think about the show, "The Price is Right."  How much easier would it be to guess the right price if the contestants had the competitive products and their prices available?

A plug for the sponsor of my Views, Sorensen Associates.  For over a quarter of a century, they have been conducting In-Store Research.  They have more experience than any company that I am aware of.  Actually, they are the "In-Store Research Company."

For additional perspectives on the effects of price, see Mr. Harry Beckwith's book, The Invisible Touch.