Pricing Strategy, Or We're Not Afraid To Be Wrong

Pictures of the bike I've been riding have become a minor internet craze today.  I now wish I'd cut the rear brake cable housing a bit shorter.  But that's not what I want to talk about.

I read this article in the New Yorker that just came out, and it's about this guy Ron Johnson who became the CEO of JC Penney.  He's had an illustrious career at Target and was the guy who developed the Apple Store concept, but by most accounts he's failed at JC Penney. 

A big initiative of his was to do away with coupons and specials and sales and just go to a strategy called "fair and square pricing."  The thrilling sounding name notwithstanding, it's an idea after our own hearts - don't make people jump through hoops or hit the timing just right in order to get their best deal, just make your best price THE price and go that way.  At Penney's, it's been a resounding failure.  A professor at Columbia says "this game of cat and mouse with regular, ever-changing discounts is illogical, but it's one that lots of consumers like to play."  I can't disagree with his assessment, but we're still not doing it. 

A lot of cycling gear is made available through discounts and bro deals and team deals and shop nights and all of that stuff.  People are trained to ask for discounts and we understand that, which is why we really don't tear our hair out when people ask us for discounts (we used to - oh, how we used to).  On the other hand, we are a lot less wordily apologetic about our strategy and our adherence to it.  If we lowered the prices for some, we'd have to raise them for everyone else.  It's that simple.  We had a few special cases when we started, we discovered that it didn't work well for us, and we ended them quickly. 

Using stuff because you got a good deal on it is a promotional thing, but in our view it's a pretty poor one.  It's usually a case that you're using it because you got a screaming deal on it, not because it's what you really wanted to have, and people recognize that.  We don't want to create a bunch of demand for our stuff at x% off of our normal prices, simply because we already charge the least we're willing to get.  The market would likely bear more, and there's plenty of evidence that broad swaths of people would bear a lot more.  We're about to launch a wheel set that legitimately plays ball with anything out there, and it's going to cost around half of what the market rate is.  We hope that it's an attractive proposition for a ton of people.  We've spent enough time telling people how we do that, but there will still be skepticism because of the price. 

It is what it is, that's the way we do it, and we're willing to be wrong. 

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I listened to an NPR piece on the JC Penny debacle, and it seemed to me that most of the failures in their new pricing system were due to uneducated shopaholics that felt like they had been "robbed" of getting the absolute best price because the everyday price wasn't artificially jacked up to begin with. I feel like the cycling business model – especially with someone who is willing to purchase a bike or frame over the internet – consists of someone who is much more educated, understands the industry, and will have less grief over your business model. Hopefully I am correct and you get to deal with these more enlightened people.


I LOL'd reading this blog. Price and brand strategy is my career.America has become the largest discount culture in the world, and people get an endorphin rush out of hunting the best bargain that can be found. American stores have amended their pricing to suit; for many things the average price in Europe (pre-tax) is similar to what it's on sale for in the States. This perpetuates a merry-go-round of sales seasons where huge numbers of transactions happen at certain times of the year, and little else happens at other times.While this is fine for large retailers, it creates a cash-flow issue for smaller firms who lack the resources to get from feast through famine back to feast safely. The way to get around it is to mix the no-discount policy into your brand values. If you have a reputation for not offering discounts, then people won't expect them. In JCP's case they went from furiously discounting to none at all; that cold-turkey treatment doesn't work well on most shoppers.Message me off-line if you want to chat more, though I do think you're 100% right in the way you're going.


Well said, and I have to say, I wholly agree with your logic. As somebody that cycles on a relatively tight budget, I frequently miss out on deals that my team is getting because I simply don't have the finances at that time. So waiting around when I need a set of wheels, and hoping that a good set will go on sale, just isn't practical to me. I very much prefer the knowledge that there are companies such as yours, where I can go and get the lowest price I'm going to get, at any time.


Holy crap, as in… holy crap I'm old? Because that's what that post made me feel. Ferg's a bunch older than me, but not so much that his daughter living with a dude wouldn't make me feel like a fossil.

Dave crap…

sailors friend

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