A single price captures everything that makes you special.  It embodies the value the market sees in your product, the value of your product in this particular season, the value your brand wields in the marketplace, the degree to which your product satisfies the needs of specific customer segments, the degree to which buyers are willing to pay for your reputation, the degree to which buyers are loyal to your product despite competing products, etc.

Once you reveal your prices to the world, your competitors instantly know how much brand equity you have, they immediately see how much value your product has in this particular season, they immediately see your reputation is strong, they are able to assess the amount of loyalty you command, and so forth.  By putting your prices out there for all to see, you implicitly give your competitors a leg-up.  To compete against you, all they need to do is see your price and shoot for something just a tad lower.

What would a future world look like where you only… show your prices to your customers and to no one else?  Only those who are committed to buy your product are actually privy to the price, and this price is zealously protected like the Coca-Cola recipe from all of your competitors.

To see this future world, we can actually look to the past and examine yesteryear’s bazaars.  Prices of the day’s harvest did not appear on some store shelf.  Rather, farmer Jack brought his tomatoes to market and as you held his tomato in your hand, you asked him his price.  And once he told you, you inevitably countered with a lower offer.  After some back and forth, you and Jack settled on a price and the transaction closed.  Jack’s competitor – farmer John –sat at the other end of the bazaar and sold his tomatoes in perfect ignorance of the price Jack just charged.  Researchers have found that in such bazaars there is no single optimal price, and indeed, there is very large price variation for the same good (see Figure below from Epstein & Axtell).  This is ferreted out in multiple computer simulations as well, where the basic laws of buying and selling behavior are imposed on artificial buyers & sellers, and over time the prices offered and counter-offered are seen to drift all over the place, but the drift does narrow over time.

Of course, farmer Jack is just as ignorant as John of his competitors’ prices – he has little idea how much farmer John is charging for his tomatoes.  And if you return day after day to purchase your tomatoes from Jack, you build a rapport and a loyalty – this loyalty is reciprocated by Jack.  He holds the best tomatoes for you, he offers you reasonable discounts in exchange for your loyalty, during times of hardship he may have even give you a free tomato.

Meanwhile, John builds up his own loyal following and sets his own set of prices where no two customers get the same price.  Why should they?  After all, no two customers are the same.  No two customers derive the same utility from a tomato.  No two buyers experience the same satisfaction in the conversation they have with John.  By concealing their prices, Jack and John force their customers to negotiate individual prices, and in the process, Jack and John respectively build “micro-markets” of buyers within the larger market of buyers in this medieval bazaar.

So, did our medieval farmers possess greater pricing wisdom than we do today?  They closely guarded their prices, and achieved the marketing holy grail of one-to-one relationships.  Did they know that their prices were a valuable asset, and therefore should be whispered and meticulously haggled with each individual customer?  Or, did history finally catch up with our farmer Jack?  Was there an economic renaissance where Jack awoke one day and realized that if he broadcast his price to the entire bazaar – even at the risk of letting John know his price – and coupled this broadcast with a marketing message that he has the best tomatoes in the market then he could not only serve many more customers per hour (i.e., he no longer had to spend 10 minutes per customer haggling), he can attract customers.

This historical awakening marks the rise of marketing.  The ascent of marketing is deeply entwined with prices becoming uncloaked.  Your prices are indeed an asset.  They are indeed your most valuable intellectual property.  But, it need not be kept secret because the prices you charge, and can charge, are unique to you.  Only you can charge the prices that you are able to charge.  And that is because you occupy a unique position in the marketing sphere.  There are attributes about you that the market holds dear, and your marketing has influenced the market to hold these very attributes with a unique level of dearness.

That uniqueness gives you the ability to charge prices that need not be the lowest in the market – your marketing uniqueness gives us an optimal price that you can scream to the market with a megaphone and not worry about becoming competitively undermined even if your competitor offers the same exact product.  Because of your marketing uniqueness, your competitors cannot replicate your price.

But, the key is that you need to remember that there is indeed an optimal price that you can charge and you must shy away from the temptation to charge the lowest possible price in the market.  You must recognize that your prices and your marketing go hand-in-hand.  The race to capture customers should not be forsaken with a race to the bottom of the barrel pricing.  Your marketing gives you brand equity, it gives you loyalty, it gives you reputation, it exposes many different customers to you– and all of this gives you a certainly ability to charge prices that lie outside the ability of what our competitors can charge.

We have grown beyond our medieval forbears.  Gone are the days of the bazaar where Jack knew all of his customers by name.  Today, we may not know all of our customers by name – but, thanks to the advent of modern pricing technology and deep analytics, we can know our customers better now than ever before in history.  In fact, our data warehouses and our data mining capabilities allow us to know many more customers with much more intimacy than Jack’s comparatively feeble mind could fathom, and we can optimally market ourselves to all of them and we can mathematically determine the best prices to charge and we can do all of this without spending a single breath haggling.

But, to broadcast prices to the world without using modern pricing science would make us more primitive than our medieval forbears, where in the absence of pricing science they at least knew they had to guard their prices.

If you’re going to let your guard down, do so with prices that you know are optimal for you!