Businesses have a plethora of pricing models to choose from, each carrying the potential to shape consumer behaviour in fascinating ways. Take, for example, the recent Oasis concert ticket frenzy. Find out more here.

Fans flooded Ticketmaster, only to find themselves in hours-long digital queues. Originally priced at £150 ($195), tickets skyrocketed to $465 each due to Ticket master's use of dynamic pricing, a model designed to adjust prices based on demand.

The uproar this caused highlights a key lesson: pricing is a powerful tool that can either elevate your brand or alienate your customers.

Nobel Laureate Daniel Kahneman, in his book Thinking, Fast and Slow, explain show consumers often use price as a shortcut to judge value. This explains why, despite the outrage, many Oasis fans still purchased those high-priced tickets—they equated the rising price with scarcity and desirability.

Dynamic Pricing in Action: A Double-Edged Sword

Dynamic pricing isn’t new, and it's increasingly popular in industries like events, travel, and e-commerce. The core idea is simple: as demand rises, so do prices. While this may boost revenue in the short term, it can backfire if customers feel manipulated, as was evident in the Oasis ticket debacle.

But why did fans keep buying, even at inflated prices? Here’s where anchoring comes into play. Anchoring refers to the cognitive bias where the first price a consumer sees influences their perception of value. When fans saw the original £150 price, it set a mental benchmark. As prices rose, they subconsciously compared the new prices to that original anchor, making $465 feel like the cost of scarcity ,rather than a rip-off.

Choosing the Right Pricing Model for Your Business

The question now becomes: how should you price your products or services?

There’s noon e-size-fits-all solution. Pricing decisions should be strategic, not reactive. A few things to consider:

1. Penetration Pricing: Companies like Dollar Shave Club and War by Parker disrupted their industries by setting low prices to gain market share. This is effective for brands looking to break into saturated markets.
2. Value-Based Pricing: This model charges based on the  perceived value to the customer, often used in premium markets. Are you     offering luxury, or is your goal mass-market appeal? A luxury brand might  leverage high prices as a signal of exclusivity.
3. Freemium or Subscription Pricing: Subscription services are a growing trend, with companies offering basic services for free and charging for premium features (think Spotify or Dropbox). It builds a base and upsells once value is established.

Reflection Questions:

• Are you aiming to be a luxury brand, or do  you want to penetrate a broad market?
• What are your competitors doing, and how can you differentiate?
• How does pricing influence the perceived value of your product?

Pricingisn’t just about covering costs and making a profit.

As Michael Porterfamously said, “The essence of strategy is choosing what not to do.” Inpricing, what you don’t do can be just as important.

Beselective, be strategic, and understand that every price tag tells a storyabout your brand.

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