A L'Oreal marketing strategy for the past several years has been to position its products a cut above the best of the drug-store cosmetic brands like Revlon and Max Factor. At $8, a tube of L'Oreal lipstick might cost a little more than a comparable Revlon product, significantly more than Cover Girl or Maybelline, astronomically more than budget brands like Artmatic, but still far less than the department-store lipsticks and direct-marketing brands like Mary Kay.

Most L'Oreal makeup products aren't bubble-wrapped on cardboard like Artmatic and Wet & Wild - both serviceable products. L'Oreal displays are elegant. So are its spokesmodels -- not merely beautiful but ultra-classy celebrities like Meredith Baxter, Cybill Shepherd, and Melanie Griffith, who get up close and personal with their sister-viewers, confiding that, yes, L'Oreal DOES cost a little more ... "but I'm worth it."

The price difference between L'Oreal and its nearest competitors is actually either nonexistent or too small to deter consumers from paying extra for hair-color products that won't go orange or turn their hair to straw. And for those frugal Friedas who will buy the least expensive product, there's always Maybelline. That's just fine with L'Oreal, which owns both brands.

Face value

His counsel is echoed in "The Power of Simplicity: A Management Guide to Cutting Through the Nonsense and Doing Things Right," by Harvard professor Jack Trout and German business consultant Steve Rivkin. Their seven "commandments of discounting" caution sellers against offering discounts merely "because everyone else does." Legitimate reasons are "to clear stocks or generate extra business" and "to survive in a mature market." Discounting should be creative and short-term, and the "ultimate customer" should get in on the savings.

"People will pay a little more for perceived value" is one of the proven pricing considerations the authors cite. Trout and Rivkin's common-sense approach to pricing recommends balance: Stay away from ruinously low and absurdly high prices.

Prestige and quality

• High-quality products should be more expensive -- people expect to pay more for quality - but "the quality should be visible."

• High-priced products should offer prestige ("the high price becomes an inherent benefit of the product itself").

• Prices must be high enough to generate "an adequate amount of [promotional] dollars to build your brand."

• Perpetual sales and discounts ("some products tend to self-destruct by being always on sale") have the effect of "[training] your customers to buy on price."

Value and economy

• Customers will pay a LITTLE more, but not a LOT more, "for a real brand with real benefits."

• Price structures must remain flexible. When a new competitor uses price to gain a foothold in the marketplace, established companies should react quickly with their own reductions. AT&T and Kodak DIDN'T; thus Fuji and MCI became marketplace fixtures. Tylenol DID, and the upstart Datril never got more than a 1-percent market share.

• Low prices can work as a proprietary competitive advantage. Southwest Airlines, the low-fare airline, limits its expenses in numerous ways, including having only one type of plane in its fleet. The U.S. Postal Service's two-day delivery service, lacking fancy tracking systems and other expenses, competes successfully with UPS and FedEx.

What's the L'Oreal secret? Using price, or consumer perceptions of price, to imply high quality. A $200 million advertising budget doesn't hurt, either, when it can buy the world's most beautiful women as evidence that L'Oreal's not just another pretty face.