Tuesday, July 14, 2009

Quality-Price-Ratio

Going through some reading this morning, I came across a story, on the blog of business nerd Jeff Gardner, that I heard long time ago while I was studying branding and its fundamentals; perceived value. This story as simple as it is, is probably to branding what "Who Moved My Cheese?" is to adapting to change.

I once heard about a wedding photographer (who charged average prices) that wanted to work less. So, she figured that if she just began raising her prices there would simply be less interest from clients. First she bumped up to $3,000 a weekend, then $4,000, then $5,000. To her astonishment, she actually began receiving more requests from clients. The clients figured that if she was charging such a high sum, she must be really good. Truth being told, she hadn’t gotten any better, she’d always been a good photographer – but the higher price led her potential clients to believe this and, in the end, they were never disappointed. Finally this photographer raised her prices to $20,000 per weekend, essentially pricing herself above what almost anyone could afford. Her potential clients then began offering to fly her to remote locations around the world just for the chance to have her shoot their exotic weddings.

I think you get my point. The old economic adage that higher price correlates to lower demand doesn’t always hold true, and this is especially true of luxury goods. Design is a premium service. A luxury good. It is certainly not necessary to run a business (just take a look at all the used car dealers of the world for confirmation), but results in a definite advantage to the businesses who value good design. Don’t be surprised to find that design and the pricing of design follows a slightly paradoxical pricing relationship.

This little story also illustrates how important market positioning is to luxury goods. Positioning, positioning, positioning, positioning, positioning, and positioning... In a recession, work on attracting quality clients. Life will be much more enjoyable. Get the idea?

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