ColumnistsAug 30, 2022
The Power of Collaboration, From All PerspectivesColumnistsSep 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 …
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.
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.
Editors' Picks
Sponsored by
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.
More on Columnists
The Latest
CrimeApr 24, 2024
Jewelry Crime Declines Significantly, But Dollar Losses Remain High A double-digit drop in the number of in-store crimes was offset by a jump in off-premises attacks, JSA’s 2023 crime report shows.
CollectionsApr 24, 2024
Pippa Small Announces ‘Venus’ CollectionInspired by the Roman goddess of love, the designer looked to the sea for her new collection.
FinancialsApr 24, 2024
Kering’s Jewelry Brands a Bright Spot in Tough Q1The luxury titan posted declining sales, weighed down by Gucci’s poor performance.
Brought to you by
The Blueprint for Success in Scalable, Personalized Jewelry RetailWith Ho Brothers, you can unlock your brand's true potential and offer customers the personalized jewelry experiences they desire.
Events & AwardsApr 24, 2024
JCK Industry Fund Announces 2024 Grant RecipientsThe selected nine organizations have outlined their plans for the funds.
Weekly QuizApr 19, 2024
This Week’s QuizTest your jewelry news knowledge by answering these seven questions.
SourcingApr 24, 2024
Rio Tinto’s Q1 Production Drops Amid Pause to Honor Lost Colleagues The mining company’s Diavik Diamond Mine lost four employees in a plane crash in January.
WatchesApr 24, 2024
These Are Rolex’s New Watches for 2024 The crown introduced a dozen timepieces in Geneva, including a heavy metal version of its deep-sea divers’ watch.
Brought to you by
How Jewelers of America Represents Your BusinessFor over 30 years, JA has advocated for the industry, fought against harmful legislation and backed measures that help jewelry businesses.
IndependentsApr 23, 2024
Hannoush Jewelers Opens New Store in New York Located in the town of Queensbury, it features a dedicated bridal section and a Gabriel & Co. store-in-store.
SourcingApr 23, 2024
Lucapa Sells 3 Diamonds for $10.5M in First Lulo Tender of 2024A 203-carat diamond from the alluvial mine in Angola achieved the highest price.
GradingApr 23, 2024
GIA Has a New Book About William RuserRuser was known for his figural jewelry with freshwater pearls and for his celebrity clientele.
CollectionsApr 22, 2024
Jacquie Aiche’s New Campaign Stars Adam Levine, Behati PrinslooThe “Rebel Heart” campaign embodies rebellion, romance, and sensuality, the brand said.
EditorsApr 22, 2024
The 22 Best Quotes from AGS Conclave 2024 Editor-in-Chief Michelle Graff shares the standout moments from the education sessions she attended in Austin last week.
SourcingApr 22, 2024
Virtual Diamond Boutique Rebrands as ‘VDB’The overhaul includes a new logo and enhanced digital marketplace.
MajorsApr 22, 2024
Signet Raises Nearly $9M for St. Jude Children’s Research HospitalThe money will go toward supporting ongoing research and aftercare programs for childhood cancer survivors.
CollectionsApr 19, 2024
Piece of the Week: Retrouvaí’s Treasure NecklaceA new addition to the “Heirloom” collection, this one-of-a-kind piece features 32 custom-cut gemstones.
CrimeApr 19, 2024
Grand Jury to Hear Case Against Jeweler Charged in Fatal Shove Following IJO ShowLast month in Dallas, David Walton pushed another jeweler, David Ettinger, who later died.
MajorsApr 19, 2024
Unique Designs Acquires China PearlThe move will allow the manufacturing company to offer a more “diverse and comprehensive” range of products.
GradingApr 19, 2024
AGS Ideal Report Now Available in Printed FormFrom now through mid-May, GIA will be offering the reports at a 50 percent discount.
SourcingApr 18, 2024
Diamond Trade Remains Cautious Amid Economic UncertaintyDe Beers’ rough diamond sales were down 18 percent year-over-year in its latest round of sales.
Supplier BulletinApr 18, 2024
Discover History’s Hidden Gems at the Las Vegas Antique Jewelry & Watch ShowSponsored by the Las Vegas Antique Jewelry & Watch Show
WatchesApr 18, 2024
Watch E-tailer Collectability Hires Kelly YochThe Patek Philippe expert will serve as personal curator for the brand-focused company.
WatchesApr 18, 2024
TAG Heuer Opens Its Largest Standalone Boutique at SeaThe 553-square-foot shop is aboard the Carnival Jubilee cruise ship.
Policies & IssuesApr 17, 2024
NDC Prevails in U.K. Case Over Lab-Grown Diamond AdvertisingNDC filed a complaint against Skydiamond for use of phrases like “diamonds made entirely from the sky.”
Events & AwardsApr 17, 2024
And the 2024 Winner of the Shipley Award Is … John Carter received the AGS’s highest honor Tuesday afternoon at Conclave in Austin, Texas.
FinancialsApr 17, 2024
LVMH’s Q1 Jewelry Sales Fall 5%LVMH said the company performed well despite an uncertain geopolitical and economic environment.
MajorsApr 17, 2024
Stuller’s B&D Opens New HeadquartersB&D Sales and Service held a ribbon-cutting event for its new location in Cranston, Rhode Island.
