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E-commerce and the Reference Price

A recent post discussed one of the foundations for pricing, which is how to establish the true economic value of your product. Part of the process was getting an accurate “reference” price, or what the next best competitive alternative was.

Today1, the NY Times had an interesting article on how out of whack the e-commerce pricing was. The premise was that while originally, the draw to e-commerce (Amazon et. al.) was to get a lower price, that has evolved to be a more convenience as a value proposition. Yet a powerful message conveyed in the shopping process was the “discount” over list price. And marketers are happy to take advantage of this psychological phenomenon.