Consumers are not irrational. They will pay for quality products. For evidence, just take a gander at Apple’s (AAPL) financial statements. While we are supposed to be in one of the worst economies in history, the company has done nothing but create new record earnings after record earnings.
The problem with pricing often arises when the increase does not match the quality of product. Perhaps two of the worst sectors right now are the airline industry and banks. To try and increase revenue, companies in these sectors are adding fees onto services where no enhancements have been made.
Airlines are charging more fees for luggage, yet it does not take any faster to retrieve it. Banks are now considering to charge debit cardholders to payment a monthly fee for no additional services.
Companies in danger or in need of money are trying to take shortcuts to gain revenue by simply adding fees on existing services to get more cash, and history has shown us that this does not work.
Have you heard of Netflix (NFLX)?
The movie distribution company was on a high and performing better quarter after quarter, yet it raised subscription pricing and, in fact, got worse in a quality of product. The stock went tumbling from $300 to near $100.
At the end of the day, you cannot hide a great product. Consumers are more than willing to pay for the product if it is worth the price, and all companies who try to inflate their revenues by just adding fees onto existing free services will ultimately feel the wrath of shareholders.