A friend of mine sent me this example. I’ll point out a few lessons at the end.
My wife took me to the Friends of the Library of Los Altos used book sale. Their pricing model made me think of you: On Friday, only members of their group are allowed in. You can join at the door for $10, so not that exclusive. Each book is typically a couple of bucks. Some hardcore members scan the books for online prices, looking for arbitrage opportunities. Others are looking to scoop up treasures before the general public is allowed in.
On Saturday, the prices are the same, but now anyone is let in. The model changes from Costco to Safeway.
On Sunday, the good stuff has been picked out, and now the volunteers would just as soon put as little as possible into storage. Pricing drops to $5 for as many books that will fit into a grocery bag,. It’s clearance time!
Three months go by to receive fresh donations, and then the cycle repeats. It works pretty well, as they raise something like $100k per year.
As a quick aside, Los Altos is an upscale neighborhood, so please don’t think an average library will make $100K per year with this technique, but they certainly could make something.
First, let’s talk about price segmentation. Let’s assume that the Saturday shoppers are the “better” in a good, better, best strategy, so let’s compare Friday and Sunday shoppers to them.
The people who join shop Friday and get first choice. This is “best” because the library makes more from these shoppers. (The price of the books plus $10.) It’s also a recruiting tool for the Friends of the Library. This is likely for people who want to support the library.
The Sunday shoppers are “good” and are willing to wait until the last minute to get a great deal, but they have a horrible selection. This is like selling excess inventory at a discount or even a loss to get rid of it.
Next, let’s look at pricing metrics. A pricing metric is what a company charges for. There are three different pricing metrics in this example.
- One group paid for a membership.
- On Friday night and Saturday, the pricing metric was a book.
- On Sunday, the pricing metric changes to a grocery bag full.
Usually, a company doesn’t change pricing metrics quickly, but they may have more than one depending on the market segment or customer. I especially like the grocery bag full because it’s unusual. Similarly, I have heard of a used bookstore in India that sells by the kilogram.
I enjoy hearing about unique pricing strategies. Dissecting them is how we learn. What do you glean from this example? Do you have any other fun ones to share?
Now, go make an Impact!
price segmentation, pricing, pricing strategies