The summer holidays are a great time to sit back, relax and read some books. And that’s exactly what I’ve been doing. I managed to get a few books in this summer and one that I really enjoyed was the Catch of the Decade. It’s a rags to riches story written by two brothers Gabby and Hezi Leibovich about how they built and sold a number of businesses including Catch.com.au and Menulog and Scoopon for example. There’s hundreds of great stories and tips in the book on how to improve a business.
The anecdote that resonated the most with me was one that centred around Pricing and that shouldn’t be any surprise to you. And so, they managed to acquire some products that typically sold for $100 that they bought them for about $20 each and they bought a 1,000 of them. They put them on the sale for $29 and that was their usual mark-up and these products sold out within minutes. And then, at a later time, when they were able to get another shipment of these products, their initial view was “Well, let’s put them on at $29 again, it worked last time and that’s our usual mark-up”. They took a step back and they said “Hey, why don’t we try and sell them for more” and so they didn’t just add on a small margin. They more than doubled the price that they were going to sell these products for, from $29 to $69.99. And you wouldn’t believe it but once again, they sold out very very quickly.
It just goes to show that when you do Pricing you should not base your prices on a mark-up or what you paid for them because that is completely irrelevant. The most relevant thing is what the customer is prepared to pay. And if customers are normally happy to pay a $100 in the stores for a product and you can sell them for $69.99, then why wouldn’t customers buy that product from you?
So I thought that was a great anecdote. There’s hundreds of other really good stories in the book. I’d encourage you to go and buy it and read it and you’ll learn a lot from it.
Thank you very much to Gary Levin, the former Chairman of the Catch Group who provided me with a complimentary copy of the book and as I said the key message is don’t base your pricing on what you’ve always done in the past or what you paid for the product. Base it on what your customer is prepared to pay. In other words, supply and demand.
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