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It has been all over the news for the last few months; a pharmaceutical company raised the cost of a particular drug from $13.50 per tablet to $750.00 per tablet.

I think that we can all agree that price hike was excessive, but how often does it happen and what does it mean for your customer?

 

As the new millennium started, there was a gas scare in a small Eastern Washington town. A gas station owner misunderstood a news report and believed that there was going to be a shortage of fuel. He immediately raised the price of gas to $7.00 per gallon. The fuel station across the street didn’t know what was happening, and so in a panic they too raised their prices to match. Cars were lined up for blocks attempting to get gas before things got worse. Within a few hours the scare was over, the truth of what happened came to light, and the two gas stations had to refund their customers for price gouging.

 

For years, Fred Meyer was the only place in a certain small town to buy groceries and other necessities. Right before hunting season, Walmart opened up their store. Walmart sold shotgun shells for half of what Fred Meyer sold theirs for. The two companies got into a price war, and when Fred Meyer finally got as low as they could go, Walmart’s assistant manager went over and bought all of Fred Meyer’s shotgun shells. Walmart then, started selling their own shotgun shells at full price.

 

Have you ever seen the same vendor at different stores, and wonder why prices are significantly different even though the different stores are getting their purchases from the same supplier?

 

How do companies afford to have sales if prices are already deemed “rock bottom”?

 

“You get what you pay for” is a well-known saying that falls in line with the fallacy that the more something costs the better it must be.

 

Imagine two health conscious people who buy organic whenever they can. One shops at a discount grocery store and the other shops at a high end grocery store. Both stores have a good selection of organic food, and get their inventory from the same supplier. The high end grocery store shopper spends four times as much as the other person for the same products.

 

Now look at your own company. Who are your competitors and what are their price points? What is your price point? Do you have a better product or do you have the same product?

 

If one of your items was lying on the street (without a bag or a tag) would people know where it came from?

 

If you were to lower or raise the cost of your products or services, how would it affect your customer?

 

Basically, this all comes down to one thing: Limitations on what you charge are merely based upon what customers are willing to spend, supply and demand, and needs and wants.

 

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April Salsbury, MBA is a strategist, an analyst, an operational guru, a recognized leader and C-suite global healthcare executive with drive and focus for competitive markets.  Co-host of The Business Forum Show and regular contributor to various business journals, she possess multi-functional and multi-national competencies with more than 15 years experience in business and healthcare. Her expertise is in invigorating revenue growth and infusing value of lean practices in growing companies through improvements to cash flow and operations management.

 

Fueling revenue, growth and profit, Salsbury & Co. is a consultancy firm focused on helping businesses and healthcare organizations achieve excellency.  Our specialists have executive experience combined with deep functional expertise to provide our clients with services that drive real impact and results.

 

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