I told the story of my visit to Harrods when I was writing my books ‘How to Increase Retail Sales’ and ‘How to Make Profit In Retail’.
Harrods is the Mecca of retailing where royals, presidents, A-list Hollywood stars and the ‘who-is-who’ in the world go to shop.
Therefore, there is no better place to learn about buyers psychology than the place they are willing to cough out thousands of their hard earn cash.
I wanted to know what is it about Harrods that attracted the best of the best.
Being the department store that attracted the rich and famous from every corner of the globe, I was literally expecting everything in Harrods to be made of gold.
I was convinced that their merchandise where made in secret factories hidden in some mountain in Germany or Switzerland.
I was expecting to catch a glimpse of Russian billionaires and Saudi prince instead what caught my attention was a toy bus.
I had bought the same bus for my son in ASDA.
It was the same red bus, in the same packaging.
I will make the assumption that the bus was made by the same people in the same factory in China not in a secret location in Germany or Switzerland.
A question popped into my mind when I saw the bus.
Why was it that the same toy bus, made by the same people in the same factory in China was being sold in Harrods almost three times the price it was sold for in ASDA?
The answer is simple.
ASDA sells toy bus.
Harrods sell classy toy bus even if it is made in the same factory in China.
There is a difference.
Understanding that difference will make a hell of a difference with the way you price your product or service.
We have been led to believe that the price of a product or service is the amount it cost to bring that product or service to the marketplace.
This is far from the truth.
The price of a product is based upon who is buying and how it is sold to them.
What Is Value
There are two perceptions of value.
There is the vendors’ perception of value and there is the customers’ perception of value.
And it is very important as business people that we do not impose our own perception of value upon our customers.
The majority of businesses price their product or service based upon the amount it cost them to bring their product or service to the market place.
However, your customer perception of value is the magnitude with which your product or service solves their problem.
May I quickly remind you that no matter the business you are engaged in, you are solving a problem.
So the magnitude to which you solve your customers’ problems, is the value they will place upon your product or service, which influences the amount they will be willing to pay for it.
The Russian billionaire who cough out three times the amount they could purchase a toy bus in Harrods does not pay for the crappy made in China bus.
What they pay for is their perceived of value of the bus.
And that perception of value is not based upon the physical product, but upon their perception of how buying the bus make them feel.
So if you are pricing your product or service, do not base your price upon your cost of bringing the product or service to the marketplace or your perception of value.
Instead base your price upon your customer’s perception of value.
What Is Value To Your Customer?
This opens up an entirely different type of question: how do you know what constitutes your customer’s’ perception of value?
The answer to this question will be the topic of my next blog post…Look out for it.
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