In another brilliant blog post, Bernadette Jiwa (The Story of Telling) reminisced about the buzz that occurred when Ron Johnson, the genius behind Apple Stores, was named CEO of JCPenney. Immediately, Johnson tried to reverse Penney's decade-long practice of offering continuous sales and discounts and replace them with small store compelling customer experiences inside of a large department store. Johnson's goal was to convert Penney's into a place where people wanted to congregate instead of a place to buy stuff. Penney's stock soared when the strategy was announced, and the entire brick and mortar industry waited with bated breath to see if Johnson would succeed. Johnson's plan crashed and burned. Penney's stock price nosedived 37 percent, and Johnson was replaced after 17 months.
Penney's core customers had come to believe and expect that when they visited the store, they would get the best deal available. When discounts were eliminated, the core base stopped coming. The lesson is that price is never logical, and customers have wide-ranging definitions of value. Why would someone pay more than $10,000 for a Hermes Birkin bag when you can buy an equally functional purse for a 100th of the cost? Like beauty, the value is in the eye of the beholder. That's why price is rarely ever the reason a prospect will walk out the door for another option. Cost may be the excuse, but rarely the reason for not trusting a showroom with their kitchen or bath remodel.
Different showroom customers understand your pricing strategy. If you walk into Tiffany & Co. to buy jewelry, the pricing and discount structure will be different from Kay Jewelers. Do you really believe that you can exact an extra discount from Starbucks? Do you expect to walk into an Apple Store and get 25 percent off your iPhone?
Pricing strategies in many showrooms are designed to create the illusion of savings. The pricing structure encourages loyalty from the kind of customer who wants a deal. The manufacturer suggested retail price is discounted, giving customers the feeling that they have saved money and the satisfaction of telling the story of the deal they received.
In his new book, This Is Marketing, Seth Godin explains, "On the one hand, you can tell the story that price is price. Tesla told this story to luxury car buyers, and they breathed a sigh of relief. But when Uber tried to match pricing to demand, it cost their brand billions in trust." Godin notes that for small organizations, in particular, the hard part isn't the mechanics of charging different amounts. "It's the storytelling."
Your pricing is the part of the story that you ask your customers to believe. As Jiwa points out, "It pays to understand what story the people you choose to serve want to believe." What pricing story do your customers want to believe and what do they actually believe?