Proctor and Gamble relaunched its Olay brand some years ago. Before doing so, they used research to test 3 price points: $12.99 $15.99 $18.99 Ay $12.99, the sales were good. At $15.99, sales tanked. At $18.99, sales were fantastic. In response, Proctor and Gamble launched Olay with a price tag of $18.99 – generating sales […]

Proctor and Gamble relaunched its Olay brand some years ago. Before doing so, they used research to test 3 price points: $12.99$15.99$18.99 Ay $12.99, the sales were good. At $15.99, sales tanked. At $18.99, sales were fantastic. In response, Proctor and Gamble launched Olay with a price tag of $18.99 – generating sales of $2.4 billion and ongoing annual growth. This example, and many others like it, suggest that businesses often apply the principles of supply and demand too rigidly. Increasing the price does not always decrease demand. Indeed, as in the case cited above, increasing the price can have the effect of putting the product in a higher quality category – resulting in an increase in both sales and margins. The facts are: The principles of supply and demand are limitedPrice almost always impacts on the positioning of a product There are many instances where increasing the price of…