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June 03, 2011

Jeff Bezos on Pricing Strategy

JeffBezos
"There are two kinds of companies ā€” those that work to raise prices and those that work to lower them." Jeff Bezos, founder & ceo of Amazon
Mucho kudos to Todd Sattersten for the quote.

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i recently revisited an early 90's HBR article about different value disciplines companies use to create competitive advantage -- operational efficiency, product leadership, customer intimacy. if a company is focused on operational efficiency, as amazon does, it indeed works to lower prices -- but if a company is focused on product leadership or customer intimacy, raising prices seems a worthy goal -- no? -- denise lee yohn

Denise ... that Discipline of Market Leaders article (and book) is golden. I agree with ya. To focus on being great at product leadership means investing money into R&D and the higher the margin a company commands dictates how much they can invest in R&D.

Also, being great at customer intimacy means spending money to ensure customers are happy. Which means employees need to be trained and customer-advantageous policies need to be in place. All that takes money and higher margins provide that.

Being great at operational efficiency means streamlining processes to reduce expenses which always a company to thrive on lower margins like Wal-Mart.

BTW ... that Treacey and Wiersema book was the turning point in this marketer's life. It changed how I viewed business and ignited a passion for business that I never knew I had in me.

Jeff really walks the walk. You can really see that with the recent dramatic price reduction for the Kindle. Amazon is focused on the long term at the consumers' benefit.

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