Sunday, October 13, 2013

Luxury, Ability, and Pricing

I recently read an excellent post by Seth Godin titled, "Understanding luxury goods"  where he goes on to talk about how the internet and luxury are coming into conflict, and this got me thinking about knowledge workers and those in the skills trades (think engineers, athletes, doctors, consultants, actors, etc.). 

In Godin’s article he states, “A luxury good gets its value from its lack of utility and value. A typical consumer would look at what it costs and what it does and say, "that's ridiculous." When a good like this comes to market, it sometimes transcends the value equation and enters a new realm, one of scarcity and social proof. The value, ironically, comes from its lack of value. ….” and he is correct.  It is NOT the utility of the item that gives its value, it is actually the fact that others admire you for owning it.

So, as Godin goes on to say, “Discount luxury goods, then, are an oxymoron. The factory outlet or the job lot seller or the yoga studio that's selling the "same thing but cheaper," isn't selling the same thing at all. They don't offer scarcity, social proof or the self-narrative of a splurge.”

Why am I talking about luxury goods and the lack of utility when you are a person who has a skill set that is unique and/or differentiated in the market?  Well, what also makes a luxury item a luxury is its scarcity.  These items may not be any BETTER than a comparable item (one $12,000 Birkin bag will not carry your cosmetics any better than a another costing less than 1% of it), but they are rarer.

In this vein, so too are your skills and abilities.  A person who can teach someone to sing if 4 lessons is worth a LOT more per hour than one who takes 50 lessons to get you through the basics.  A branding firm or expert that can get you a logo, tagline, and mission statement done is two weeks with just two meetings it worth way more than one who may charge ¼ the price per hour but takes 10 times as long to complete and requires 5 to 8 meetings in the process. So, if the music instructor is charging $150/hr versus $50 or the branding firm charges $450/hour versus $100/hr what would you choose? 

I believe in “go with the best of settle for the rest.” If you are like most people, you would most likely think you are “saving money” by choosing the lower cost (per hour), but you would be making a mistake.  The “fully born cost” is actually greater with the seemingly lower cost provider! Why?  Well first off, you are probably (but not always) getting an inferior service, which results in a sub-par result, project or experience.  You are also spending more of YOUR time, which unfortunately you are discounting.  So the luxury here is TIME, and the old saw of “time is money” should be applied to this equation.

Remember that the “same thing but cheaper,’ isn't selling the same thing at all.”  It is important to think of this not only when purchasing a service, but also when offering one.  Too often with the advent of internet pricing transparency, it is way too easy to compare pricing of your “service” or skill set with someone else, but you really cannot. If you offer a superior service, and I mean superior, price yourself that way, but also know HOW you are superior.  Discounting to get "those" customers is just...stupid and a waste of time.  If you are exceptional, you do NOT need to need to tout.

It is important to note the luxury you offer is that you are so much BETTER, FASTER and CHEAPER (overall) than anyone else that you would be crazy to use them. So, do NOT take customers who want a discount, or try to devalue your skills,  take on clients who want a better product and appreciate the excellence of your work and the superiority of your craft.  While some luxuries may be perverse testaments to excess, one luxury people cannot live without is extra time.  As Visa states, some things are priceless!


Anonymous said...

That's why u try to create unique niche & positioning of your product, so u can't be compared to others.

Profit Prophet said...

Indeed ANON...indeed