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Learning from retail pricing strategy

Retail has a lot to teach the open-source crowd in how to position offerings. Just ask Ralph Lauren.

I read this fascinating article on the way home from Linuxworld today, and think there must be some way to apply it to open source. OK, the strategy sounds sneaky and underhanded to me, so I'm not going to be implementing it anytime soon.

But surely there's a less nefarious way to do it? More importantly, I'm sure the technology world has much to learn from how retail operates, especially as much of our precious intellectual property becomes commodified.

What is the strategy?

We've all been there: A window display or a recommendation lures us into a store -- and we face unexpectedly astronomical price tags. It seems to happen more often these days as many luxury brands -- selling everything from $14,000 Ralph Lauren handbags to $899 Bugaboo baby strollers and $6,900 Beefeater barbecue grills -- push their top price points higher than they've ever gone before. What's priced below falls into that ever-expanding category: "affordable luxury."

Some people cut and run when confronted with prices that seem crazy. But many of us experience a sudden emotional-mathematical transformation. We set a new ceiling for a "reasonable" price. Disinclined to go all the way to buy the trophy, we instead settle for a consolation prize.

In other words, set the ceiling far higher than any rational person can or will go, and then offer one's primary products at a more affordable, but still pricey, level. I'm not sure how to apply this to open source - "My super-deluxe enterprise edition costs $0.00, but you could probably get by for the normal version at a cost of $0.00" - but I do think the idea of setting ceilings and floors is a good idea.

In fact, it's Sales 101 (even in open-source sales) to offer a customer the high-end offering, a mid-range offering, and a low-end offering, with the expectation that they'll opt for the middle tier. It's not really a matter of sneakiness, but rather of helping the customer choose what is best for them (adequate support SLA, for example) by giving them clear distinctions between what they could get (but don't need) and what they should get (and do need).

Starting tomorrow, Alfresco will be offering a $14,000 handbag with our Super Duper Deluxe Enterprise Edition. Not in the market for a handbag? Well, you can just get the normal version, then. :-)