Tag Archives: pricing

You don’t put bourbon in it?

fivedollarshake

The place is Jack Rabbit Slim’s. The actors are Uma Thurman and John Travolta. The movie is, of course, the incomparable Pulp Fiction.

Vincent Vega, played by Travolta, orders a steak and a vanilla Coke. Mia Wallace, played by Thurman, orders a burger . . . “and a Five Dollar Shake.”

Vincent has to ask, “Did you just order a five dollar shake? That’s a shake – that’s milk and ice cream?”

“Last I heard,” is Mia’s reply.

Not yet satisfied, Vincent confirms with the waiter, “You don’t put bourbon in it or nothin’?”

“No.”

When the shake arrives, while Mia is taking a long first sip, it’s all Vincent can do to not jump across the table to try it. Somehow he restrains himself. “You think I could have a sip of that?”.

Marketing and economics textbooks are filled with chapters on price resistance, consumer resistance to high prices. Some of the graphs would suggest that as you raise the price of the milkshake that the quantity ordered decreases linearly.

Travolta proves them wrong. It is clear he is attracted to the high price. He has to try a five dollar milkshake to see what the fuss (and price) is all about. He wouldn’t even have noticed a “Two-Dollar Shake”.

It’s not as simple as jacking up your prices, though. One expensive milkshake at a place like Jack Rabbit Slim’s is perfect. A Home Depot or Target can’t suddenly double their prices. You have to be selective about what products are priced higher. The conditions must be right and fit the story you tell.

And they must be priced high enough to stand out. Carl’s Jr. tries this with their famous, “Six Dollar Burger” but it doesn’t work the same because they were just communicating that their fast food burger is as good as a sit down restaurant burger. The “Five Dollar Shake” wasn’t trying to match anything.

And instead of scanning your inventory for a product worth doubling the price on, develop a new product. This trick doesn’t work on products that your customers already know the price of.

[photo credit: Jane Bush]

The middle will kill you

The top is good. The bottom is good. The middle will kill you.

Your price is a signaling mechanism.

If you’re the high priced provider, like:

Cars – Mercedes
Jewelry – Tiffany
Watches – Rolex
Cookware – All Clad
Refrigerators – SubZero

…people assume you offer the best quality.

This is good.

If you’re the low-cost provider, like:

Meal – McDonald’s
Cookware – Lodge
Furniture – IKEA

…people assume you deliver an acceptable product at the lowest cost.

This is also good.

If you price in the middle, you’re saying:

“We’re not the best, so we’re not priced like the best. But we’re pretty good. We cost more than the low cost guys because we’re better than them.”

It’s not a very compelling message.

Also, it’s crowded. By definition, almost everyone is in the middle. Now you’re competing with everyone. Also not compelling.

When pricing your product or service, the top is good. The bottom is good. The middle will kill you.

Do you know your pricing?

Last night, I parked in Manhattan before dinner with friends and I had to run into a convenience store to get quarters for the meter. I thought it only fair to make a small purchase while asking for quarters, so I set a pack of Wrigley’s 5 Fire gum on the counter and got out a $5 bill. The owner, a nice grey-haired fellow, flipped the pack over and realized there was no price tag. He asked me to grab a second pack to determine the price. I did and handed it to him.

He exclaimed, “2.80?! For a few sticks of gum!?” I explained that I really just needed the quarters. He insisted that I put both packs of gum back and happily gave me change for the meter. He then chuckled and said, “that’s crazy…..$2.80 for GUM”.

I laughed as I went to plug my meter. He had thousands of SKUs crammed in his small store and had clearly forgotten the price of a pack of gum.

Do you know the price of all your products? Would you be embarrassed by any of them?

Pricing by experience

There is a fable about Pablo Picasso…

A woman was strolling along a street in Paris when she spotted Pablo Picasso sketching at a sidewalk cafe. The woman asked Picasso if he might sketch her, and charge her accordingly. Picasso graciously obliged and in just minutes, there she was: an original Picasso.

“And what do I owe you?” she asked.
“Five Thousand Francs,” Picasso answered.
“But it only took you three minutes,” she politely reminded him.
“No,” Picasso said. “It took me all my life.”

Whether it’s true or not isn’t important. It’s an important message that stands the test of time.

When pricing your services, don’t price by the minutes, hours or days. Price by experience.