In 2010, Kara Swisher dubbed Michael Dearing, “The Hottest Angel Investor You’ve Never Heard Of”. Fast forward to today and the Harrison Metal founder and former SVP at eBay has already celebrated a number of wins with AdStack (acquired by TellApart), Mixer Labs (acquired by Twitter) and Aardvark (acquired by Google).
Through it all, Dearing has dedicated his career to helping companies productize emerging technologies, build go-to-market strategy, and establish their marketing programs.
In a recent Heavybit presentation, Michael Dearing offers his thoughts on pricing strategy and how behavioral economics are modifying the classic supply and demand model.
After listing what he describes as “Economics 101” sources, the investor goes on to cite additional thinkers in arguing his belief that “pricing isn’t a math problem, it’s a judgement problem.”
Once you watch the Dearing video, you may want to dig into the below additional resources.
- Amos Tversky and Daniel Kahneman : Dearing believes that Tversky and Kahneman’s look at a two part decision-making system (intuition and reason) is core to understanding pricing judgement and what customers value. Psychologist Daniel Kahneman was awarded the Nobel Prize in Economics for the duo’s research on intuitive decision-making frameworks. Unfortunately Tversky had passed away by the time the award was given. Dearing mentions Kahneman’s Nobel Prize Lecture as a great resource for entrepreneurs. For those interested in a deeper read, Kahneman also wrote Thinking Fast and Slow chronicling his work with Tversky.
- Robert Dolan: Says Dearing of Harvard Marketing professor Robert Dolan, “He’s a genius. I worship him, and I think he created one of the most interesting and useful concepts in marketing.” Rather than focussing on the difference between the cost of production and the price to sell, Dolan suggests that companies concentrate on the difference between the price of a product and the perceived value to the end user. Essentially, the idea is that buyers only decide to purchase if the perceived value of the product/service is greater than the actual price. An overview of Dolan’s theories are available via a short Harrison Metal video. Dearing also suggests purchasing Dolan’s essay, The Principles of Pricing.
For the complete Heavybit video featuring Michael Dearing’s Pricing talk, visit our library.