What This Book Will NOT Teach You

The key to successful profit-maximizing pricing is knowing your potential customers. If a firm does not manage to learn the characteristics of all its potential customer types, such as consumers' willingness to pay, the firm will not be able to properly price its products and services.

This book will not teach you how to identify the characteristics of your consumers. Although several econometric techniques for identifying these characteristics are described in Chapter 2, a comprehensive analysis of this subject is beyond the scope of this book. The two main reasons for not attempting to include these techniques in this book are (a) consumers' preferences in general, and willingness to pay in particular, vary all the time when new competing products, services, and brands are introduced to the market, which means that (b) the most efficient way of learning about customers is by trial and error, or simply experimenting with different tariffs while recording how consumers respond. That is, as this book shows, successful pricing techniques should not only be profitable, they should also induce consumers to reveal their characteristics.

What This Book Attempts to Teach You

Revenue and profit are affected by a wide variety of observable and unobservable parameters. Therefore, even if various pricing techniques are well chosen and properly used, there is still no guarantee that the firm will be profitable.