Technical jargon: What does "price point" actually mean?

Anyone who clicks on Adwords, reads newsletters, stares at billboards, listens to radio commercials or visits online/offline stores today will probably notice something: The arguments used to address and convince customers are increasingly limited to one thing - price. It's no wonder, then, that with "price point" or "right price point," an actually old term from business administration is suddenly gaining in importance.

As early as the 1960s, economists had turned to price research to find the right price for a product or service. Clive Granger, André Gabor, Philip Kotler and others thus became heroes of the market and marketing. Then, in the mid-1970s, it was the economist Peter van Westendorp with his Price Sensitivity Meter who laid the foundation for what soon became a matter of course everywhere: individual pricing.

Although the advertising industry is considered progressive, it is backward in precisely this respect. For years, the triangular relationship between media publishers, advertising and media agencies resisted letting the market determine the right price point, and lived on commissions that advertising customers had to pay in a concealed or declared manner.

Other industries have already suffered from such price fixing and service agreements much earlier: the representatives of the airline industry, for example, can tell you a thing or two about it, since they had to come up with something after the IATA tariffs were abolished under antitrust law in 1990. This ushered in "The Future of Pricing," which author E. Andrew Boyd describes with pinpoint accuracy in his book of the same name. When on October 23, 2000, a search engine called Google called itself the advertising agency of the future and launched its Self-Service Advertising Program, suddenly price was no longer static in the advertising industry either.

That's almost 20 years ago now - and it never ceases to amaze me how often price is the only topic in advertising in terms of content, but how recalcitrant the industry is when it comes to its own prices or even the right price point.

The author: Benno Maggi is co-founder and CEO of Partner & Partner. He created the column "Vom Fach" in the NZZ Folio and was in charge of it for years. He presents and decodes words and terms that can be used either for small talk, being important, getting excited, playing Scrabble or simply for fun.