DM Consultants

The Psychology of Pricing

As a business consultant I always encourage entrepreneurship. Yesterday, a child reminded me of a lesson learned in Business School on pricing. As in most neighbourhoods it is not rare to see children with their lemonade stand and as adults we support them. This child had a large sign made on white cartridge paper, it was clearly written in his best handwriting “LEMONADE .75 cents.”

Several cars waited on the corner to support him, he served it in a big red plastic cup with lots of ice. I paid him $1 and left.  As I drank his refreshing lemonade it got me thinking, why were so many people parked waiting to buy from him? I believe it must be the pricing, other kids in my neighbourhood sell at $1, this kid was smart, his was priced lower yet he made the same $1. I imagine people paid $1 and told him to keep the change.

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