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Price Isn't Tied to Your Product
The Price-Product Link becomes ingrained religious belief in most business owners beginning with textbook formulas for setting price. Retailers are taught the doctrine of "keystone" pricing, meaning double their own cost. If you buy it for $1, it should be priced at $2, then, at times, discounted from there. In my line of work, direct marketing--what was once called mail-order--we're also taught formulaic mark-up as doctrine, although ours is 8 times rather than 2 times. In businesses where raw materials are converted to finished products, like printing, there is a plethora of price calculating software to do the thinking for you, using standardized mark-up formulas. In every case, the price is chained to the product. There is the fundament that a particular product is worth only a certain multiple of its cost and not a penny more, period, end of story. Unfortunately, this widely and deeply held belief is completely and utterly stupid.
The two biggest "chain cutters" that de-link price from product are who is buying the product and the context in which the product is presented, priced and delivered.
Who you sell to you what matters. The simple act of selling whatever you sell to more affluent consumers may allow its price to rise, with no other modifications.
Price for the same product also varies by context. This is easy to see with commodity items like food, even though many restaurant owners still never grasp it. When is one-third pound of peanuts not one-third pound of peanuts? In a jar, on the shelf, that's all they are, unless dusted with Starbucks mocha latte powder and packaged in a fancy tin. But when served hot, from a vendor's cart in the park, scooped into the bag and sprinkled with cinnamon by a handlebar mustached man in red-white striped jacket and straw hat, with calliope music playing from the CD player in the cart--then they are not peanuts at all. They are an experience that evokes emotional feelings. Even as you read my words, your mind may have flashed to Mary Poppins in the park or a trip to the circus as a child. While it is not so easy for most to transfer this idea to other businesses, it does, in fact, transfer to any business. Context alters or liberates price. Move the exact same product from one context to another and its price can easily be altered.
Dan Kennedy has earned him the moniker “Millionaire Maker” through his network of consultants, which help more than a million business owners succeed every year. He is the author of the bestselling No B.S. Series and co-author of Uncensored Sales Strategies, available from Entrepreneur Press.
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