Going back to my basic economics accountancy course, we used to be asked to calculate the best price to sell things at. A typical question would give three price points, and the levels of demand with each plus a cost of sale. So for example (and you can skip this next bit if you want), with a £20 cost of sale
£50 gets 1,000 customers, £40 gets 1,600 and £30 gets 2,500. What is the best price? A, B or C
If you do the sums, as we had to, the answer is B: £40.
(£50 gets £30,000 profit, £40 gets £32,000 and £30 gets only £25,000 as we are starting to get into “pile it high, sell it cheap” land.)
In the real world however the correct answer is D; all of them.
There are two ways of doing this. You can produce three identical products, badge them differently and sell at different prices, (easier if you have established brands as a large company will). Or, if that’s not possible then make them different; a basic, standard and luxury product with minor (and low cost) differences.
In the example above that nets you £51,000* as you pick up all the potential customers at the price points they are happy with.
A good example is VW Audi, who, before becoming famous for their, ahem, innovative engine management system, announced that they would be selling the same cars at different price points. If you wanted prestige you could buy an Audi, if not a VW, or if you are on a budget a Seat or a Skoda. Essentially the same cars but targeting different markets and sales demographics.
This is slightly different to the price distraction I mentioned a while ago, but adding that in to the mix (unlike exam questions nothing exists in isolation, especially in economics) will boost profit even further.
*This assumes that 1,000 will buy at £50, then a further 600 at £40 and another 900 at £30 and that the products are actually identical.