Konzept des Tages: Imperfect Substitutes

One of the driving factors in setting prices is understanding the issue of substitutes. If there are four kinds of bottled water and one is half the price of the others, guess which will generate all the sales? They are quite close to perfect substitutes, so take the cheap one.
Even though all the movies at the multiplex cost $12 a seat, you can’t often substitute one for another to save money. You don’t go to Mall Cop merely because it’s $2 less.
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Your job then, isn’t to merely set your price low enough to keep people from seeking substitutes. It’s to create a product or service unique or connected or noteworthy enough that the other choices are ever more imperfect.

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