Progressive Markdown – Using the wisdom of crowds to reach the right price point

A retailer puts a new product in a store. It doesn’t sell very well so they reduce the price. It sells a little better but they still have plenty in stock so they reduce the price even further. It sells at a more usual rate so they keep it at that price until the stock sells through. 

Value is a subjective thing. A product is only worth what someone will pay for it, so progressively reducing the price of the product until it matches the customers perceived value is a surer means of hitting the right price point. It’s more customer-focused than pricing a product by margin targets. 

For businesses where space is at a premium and the cost of holding on to non-selling products is as important as the margins achieved by selling the products, progressive markdowns are a great way of letting the customers tell the business how much the business should be charging them.