My lovely wife occasionally sends me pricing stories she finds. Here is one she found on Pinterest, but you can find this many places on the Internet, so it’s not clear who to credit.
A father told his daughter, “You have graduated with honors; here is a car I bought many years ago. It is pretty old now. But before I give it to you, take it to the used car lot downtown and tell them I want to sell it and see how much they offer you for it.”
The daughter went to the used car lot, returned to her father, and said, “They offered me $1,000 because they said it looks pretty worn out.”
The father then said, “Take it to the pawn shop.” The daughter went to the pawn shop, returned to her father, and said, “The pawn shop offered only $100 because it is an old car.”
The father next asked his daughter to go to a car club and show them the car. The daughter took the car to the club, returned, and told her father, “Some people in the club offered $100,000 for it because it’s a Nissan Skyline R34. It’s an iconic car and sought by many collectors!”
Now the father said this to his daughter, “The right place values you the right way. If you are not valued, do not be angry, it means you are in the wrong place. Those who know your value are those who appreciate you…Never stay in a place where no one sees your value.”
Great story. And the personal lesson the father taught was pretty good. But what lessons would a pricing person get from this?
First and most obvious, price segmentation is important. Different buyers are willing to pay different prices.
Second, in times of supply constraints, find and sell to the buyers who have the highest willingness to pay. You only have so much. Get as much as possible from what you have.
Third, know the value of your products. Not just in the sense of willingness to pay but in the sense of what buyers are looking for. The car dealer, the pawn shop, and the collectors are all looking for different characteristics. If you know whatbuyers value, you can more easily target the right buyers with the right products at the right prices.
Finally, know the difference between will I decisions and which one decisions. To the car dealer and pawn shop, this was just one of many old cars they could buy and resell. If they pass this one up, there are plenty more out there. To the collector, this was a one-of-a-kind vehicle. This special car doesn’t become available very often. They either buy it or not, and they probably aren’t looking at competitive alternatives. If a customer doesn’t buy from you, what will they do?
These are the lessons I pulled from the story. What do you see?
Now, go make an impact!
