18 February 2016
In the high-end interiors industry you often come across the age-old dilemma of expanding a product line, an often difficult decision is whether to go up- or down-market. Either choice has its own inherent risks and rewards: Introducing a lower-priced line of products may open your brand to a new kind of consumer, but you need to be careful not to commoditize your brand. Going up-market can drive revenues and profits, but you often have to accept lower volume, depending on how high you go.
I was reminded of the field of “price theory” recently, when reading a piece by Blair Enns, a consultant to my creative industry, whom I’ve heard speak on a number of occasions. He says that “all value is subjective – it is in the eye of the beholder, the buyer.” Of course, as an owner or marketer of your high-end interior brand, you should already know this point. But what interested me most was his point on options:
“Humans cannot subjectively perceive absolute values, only contrasts. Taken together, these two principles mean that people cannot accurately assign monetary value to something, they can only discern whether one thing is more valuable than another. When a buyer is endeavoring to measure value therefore, he has to make a comparison. By implication, any seller that can control or at least affect the items being compared can impact the buyer’s perception of value. Dramatically. By orders of magnitude, even.”
“When you neglect to provide options, the client goes in search of something against which to compare your offering and its price point. It might be past experience, similar services from other firms or a host of other comparison points. By offering options, you move the question from ‘how do I know this is good value?’ to ‘which of these is the better value?’ The latter question is the one the brain is equipped to answer; the one you should be enabling your client to answer.”
If your company is considering introducing a new product line, how helpful would it be to frame your due diligence in this light? Imagine your prospective customer evaluating your product line – online or in-store – and asking himself, “which of these is the better value? ”
Now imagine how much more successful you could be if you provide the tools, information, and insight to help him answer that question in a way that is win-win for both of you. Offering a Good, Better, Best product line is not simply a strategy you employ just because everyone else does. It should be thought of as a critical exercise with enormous implications for profit margins and brand equity.
If you’d like to read more of Blair Enns’ article on price premiums: