Your price may be too low, increasing it may spur sales

Correct. And I follow this "strategy" since some years when it comes to services and specialized products (not mass products, which I make as cheap as possible). Low prices usually attract nasty clients with inappropriate expectations.

And from my side as a client: E.g., I don't look at clothes that are cheap. They usually don't look good, have low quality, wearing them feels unpleasant and--very important--send wrong signals to those who know good clothes (and believe me, many important people spot the quality of your clothes). Going for long-lasting quality usually has its price. I'm not necessarily buying expensive stuff because it's expensive, but it gets my attention at least.

I'm not too sure about the name of that website:

"He rain-made you. A guy says if you pay him, he can make it rain. You pay him. If and when it rains, he takes the credit. If and when it doesn't, he finds reasons for you to pay him more. Clay Davis rain-made you!"

That aside, this is not rocket-science, just basic marketing. The only proviso is that you can price yourself out of the market. I recently purchased a new AV product for half the originally-quoted price. I liked it for its convenience, simplicity, etc, but it wasn't so simple and so convenient I would pay UKP5000 to replace Kaspersky at UKP1700, nearly 3x the amount. The sales guy took the point and brought the price down to UKP2500. So, I paid extra but felt like I got a bargain, which says plenty for that guy's sales skills.

Also, if your product can be used by a customer in a way that they can see a direct dollar value stemming from it's usage don't be afraid to charge an amount proportional to that dollar value.

Even a very simple product may be worth $100 a month to someone if they can directly see $500 being added to the bottom line with it's use. Sometimes these types of products cheapen themselves by selling for proportional low prices.

There is a lot of upside to being perceived as a luxury good. I think Apple is the model example. Anecdotally, I know my mom charges a lot more for piano lessons than many other teachers in the area. Which has the effect of making her more sought out by suburban parents with disposable income.

Yeah, this is often true. My iPhone app sells better at 2.99 than 1.99, and I may bump the price again. Hard to A/B test on the App Store though.

Price elasticity testing is one of the simplest, and most profitable experiments you can run in an A/B testing engine:

http://www.marketingexperiments.com/improving-website-conver...

http://en.wikipedia.org/wiki/Price_elasticity_of_demand