Columnists

Squirrel Spotting: Price Has Nothing to Do With Value

ColumnistsSep 07, 2022

Squirrel Spotting: Price Has Nothing to Do With Value

Price is a number written on a tag while value is how good a customer feels when they leave your store, Peter Smith writes.

Peter Smith is an industry consultant, speaker, sales trainer, and author. He can be reached via email at TheRetailSmiths@gmail.com.
Ernest Beaux was a perfumer of some renown, having created the fragrance that became Chanel No. 5.

According to biographer Tilar J. Mazzeo, author of “The Secret of Chanel No. 5,” when Beaux was experimenting with different ingredients in the process of creating the fragrance, he added generous amounts of jasmine from the perfume capital of Grasse in the South of France.

In doing so, Beaux felt it necessary to warn Coco Chanel that a perfume with so much jasmine would be “fabulously expensive,”  to which she reportedly replied, “In that case, add even more.”

Chanel’s exhortation to effectively add more cost to the fragrance was uttered in 1920, decades before we would come to understand the effects of pricing psychology on consumer behavior.

Her statement foreshadowed the 2021 words of Shankar Vedantam, who wrote “If you want to heighten people’s expectation of a product, just raise its price,” in his book “Useful Delusions: The Power & Paradox of the Self-Deceiving Brain.”

Absent the subsequent reams of scientific data on pricing psychology available in recent years, it was Chanel’s experience and instincts that convinced her consumers would be more apt to embrace Chanel No. 5 if it carried a premium price.

She believed higher prices were essential to communicating the product as being of exceptional quality, and she was neither wrong nor alone in that belief.

Michael J. Silverstein and Neil Fiske wrote about Ely Callaway (golf) and Jim Koch (Sam Adams beer) doing the same thing with their respective brands in their book, “Trading Up.”

When Koch introduced Sam Adams, he priced the beer at a 100 percent premium to Budweiser, and a 50 percent premium to Heineken, and still became the largest specialty brewer in the country.

But Chanel, Callaway, and Koch didn’t take average products and artificially prop them up by arbitrarily charging more. 

They knew their brands had to deliver an exceptional product and experience, so they infused excellence and quality into the very DNA of their brands during the development process, setting the highest bar for customer expectations. 

 Related stories will be right here … 

Tim Calkins, a professor at the Kellogg School of Management at Northwestern University, wrote about an experiment in which students were asked to estimate the cost of a pair of earrings they’d been shown.

The experimenter asked the students to provide three estimates on the earrings.

The first estimate was based on the presumption that the earrings were generic, the second as if they had come from Walmart, and the third as if they had come from Tiffany & Co.

The students estimated the unbranded earrings at $550. They estimated the Tiffany earrings at $873, an increase of 60 percent over the generic.

Lastly, they estimated the earrings at $81 if they believed they had come from Walmart.

That means the students estimated the earrings from Walmart at a reduction of 91 percent versus Tiffany and 85 percent versus generic.

The results of the experiment prove Hermann Simon’s point in “Confessions of the Pricing Man,” in which he states: “Price is likely to serve as an indicator of quality when buyers are uncertain about a product’s underlying quality. This happens when they are confronted with a product that is entirely new to them or one which they rarely buy.” 

The students, knowing very little about jewelry, made their estimates based on the association, good and bad, with two retailers at the opposite ends of the pricing/quality continuum and the unknown entity of generic. 

The perceptive value demonstrated by the students, however, does not tell the whole story. Believing that a product is worth more has been shown by scientists to actually register neurologically, to the point that you really do enjoy it more. 

Your perception, as it happens, becomes your neurological reality. 


Supposing that customers are all driven to find the best price when they enter a store defies both logic and consumer psychology.

First of all, a significant number of customers spend considerably more than their stated budgets when they shop. That alone should put to rest any notion that all, or even most, customers are looking for the lowest price. 

Secondly, as Simon wrote, “The key challenge in premium pricing is the balance between value and costs. The emphasis here is on high value to customer, which includes not just the core product itself, but also the extensive envelope of other benefits that surrounds it.” 

Building value is not a mathematical equation, but it does require consideration of key elements, such as what is most important to customers (and if you believe that it is always low price, you’re probably not listening) and how quality plays into the customer’s decision (I would always default to quality as an important consideration).  

As you present options to your customer, treat your products with the deference and respect that befits a superior quality. Convey the benefits of exceptional quality now, and in the months and years ahead. 

One of the most insidious elements of sales is when a salesperson spends from their own pocket; they decide what the customer can or cannot afford to spend. They believe price to be the single most important factor for the customer and all too often, that self-delusion becomes self-fulfilling. 

Value is not price. Value is when a customer leaves your store feeling like a million bucks, no matter what they spent.

Peter Smithis an industry consultant, speaker, and sales trainer, and author of three books, “Hiring Squirrels,” “Sell Something,” and “The Sales Minute.”

The Latest

AuctionsNov 23, 2022
This Sapphire Tiara Once Owned by a Danish Princess Is Going to Auction

The Dec. 1 jewelry sale at Bonhams-owned Bruun Rasmussen will have several other pieces of royal jewelry on the block.

FinancialsNov 23, 2022
Movado Lowers Guidance Amid ‘Uncertain’ Retail Environment

Its Q3 sales dipped as inflation took its toll on shoppers in the U.S. and Europe.

MajorsNov 23, 2022
De Beers Jewellers Is Popping Up in Connecticut

The temporary store is the result of a collaboration with Betteridge.

Brought to you by
Knowledge and Skills for Today’s Hot Topics

From laboratory-grown diamonds to design to country-of-origin, GIA's Alumni Collective™ has a seminar to suite your needs.

CollectionsNov 23, 2022
Piece of the Week: Rembrandt’s Turkey Charm

Charm fans will gobble up this festive “Piece of the Week” pick.

Weekly QuizNov 18, 2022
This Week’s Quiz
Test your knowledge of the latest jewelry news with this quick test.
Take the Quiz
AuctionsNov 22, 2022
Jewelry Recovered from Sunken ‘Ship of Gold’ Heads to Auction

The S.S. Central America sank in 1857 off the coast of South Carolina, carrying tons of gold from the California Gold Rush.

IndependentsNov 22, 2022
See the Greek Jewels Going to Auction for Charity

Several Greek jewelry designers have donated pieces to the annual Hellenic Initiative silent auction.

Brought to you by
Diamond Shoppers’ 2022 Holiday Wish List

Give your customers the best diamond buying experience this holiday season.

Events & AwardsNov 22, 2022
Hodinkee to Receive Gem Award for Watch Excellence

Plus, see this year’s list of nominees for the Jewelry Design, Media Excellence, and Retail Excellence awards.

SourcingNov 22, 2022
Head of Australian Miner Burgundy Diamond Resigns

The company announced the resignation of Peter Ravenscroft late last week, effective immediately.

SourcingNov 21, 2022
Provenance Proof Launches Online Marketplace for Traceable Gems

Debuting today, it is open to Provenance Proof blockchain users.

TechnologyNov 21, 2022
Version 2.0 of the NDC’s ‘Assure’ Directory Is Now Live

Assure is the program the Natural Diamond Council launched in 2019 to test lab-grown diamond screening devices.

MajorsNov 21, 2022
JK Findings Acquires Intercept Silver & Jewelry Care

Intercept Silver & Jewelry Care distributes anti-corrosion and anti-tarnish products.

MajorsNov 21, 2022
David Yurman Just Opened a Palm Beach Outpost

It’s located on famed shopping street Worth Avenue.

EditorsNov 18, 2022
9 of My Favorite Pieces from the AGTA Spectrum Awards Editors’ Day

Senior Editor Brecken Branstrator’s highlights include a chrome tourmaline ring, a giant opal necklace, and an American mined stone.

CrimeNov 18, 2022
Jewelry Store Security Guard Killed in Armed Robbery

Police in Calumet City, Illinois are looking for several suspects involved in the robbery of a jewelry store in the River Oaks Mall.

MajorsNov 18, 2022
AGS Adds Sumit Dangi to Board of Directors

Dangi is global chief financial officer and treasurer at Jewelers Mutual Group.

CollectionsNov 18, 2022
Piece of the Week: Tabayer’s ‘Oera’ Pendant

The brand’s signature shape is rendered in an autumn-appropriate color palette.

GradingNov 17, 2022
GIA Labs Report Receiving 2 Moissanites Submitted as Diamonds

The discoveries were outlined in the Lab Notes section of the fall 2022 issue of Gems & Gemology.

MajorsNov 17, 2022
Boucheron’s Magical Holiday Campaign Has Landed

“Boucheron Wonderland” showcases best-selling styles, high jewelry, and some familiar faces.

MajorsNov 17, 2022
At eBay’s New Pop-Up, Pre-Owned Luxury Goods Are Currency

The temporary space in New York’s Diamond District lets shoppers trade in one authenticated luxury item for another.

SourcingNov 17, 2022
De Beers’ Oct/Nov Rough Sales Total $450M

As in September, the company’s sales were up slightly year-over-year but down month-to-month.

GradingNov 17, 2022
Professor of Artificial Intelligence Among Additions to GIA Board of Governors

Lake Dai, who teaches at Carnegie Mellon University, joins the board alongside Rosy Blue Managing Director Russell Mehta.

AuctionsNov 16, 2022
One More Big Pink Diamond Heads to Auction, With $35M Price Tag

It follows a few other notable fancy color diamonds at auction this fall, with mixed results.

CollectionsNov 16, 2022
There’s a New Jewelry Destination in Greenwich, Conn.

Serpentine Jewels has branched out from its private jeweler beginnings to a ready-to-wear collection and a Connecticut townhouse.

WatchesNov 16, 2022
Rolex Names New Group President

A filing made in Switzerland shows Nicolas Brünschwig now holds the top position at one of the most popular brands in the world.

Events & AwardsNov 16, 2022
These Pearl Jewels Won the 2022 CPAA Design Competition

The Cultured Pearl Association of America held its 13th annual International Pearl Design Competition this fall.

×

This site uses cookies to give you the best online experience. By continuing to use & browse this site, we assume you agree to our Privacy Policy