Price Is a Story, Not a Strategy

In another brilliant blog post, Bernadette Jiwy (The Story of Telling) reminisced about the buzz that occurred when Ron Johnson, the genius behind Apple stores, was named CEO of J.C. Penny.  Immediately, Johnson tried to reverse Penny’s decades-long practice of offering continuous sales and discounts, and replaced them with small store compelling customer experiences inside a large department store.  Johnson’s goal was to convert Penny’s into a place where people wanted to congregate instead of a place where you buy stuff at a discount. Penny’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 and his strategy crashed and burned.  Penny’s stock price nosedived 37 percent, and Johnson was ousted after just 17 months.

Penny’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 different customers have a wide range of the definition 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 100^th of the cost?  Similar to beauty, value is truly in the eye of the beholder.  That’s why price is rarely ever the real reason a prospect will walk out the door - price may be the excuse, but rarely the reason for not trusting a showroom with the customer's bath or kitchen remodel.

The phrase "one price fits all" arguably does not apply to most decorative plumbing and hardware showrooms.  Different market segments have different expectations of showroom pricing strategy, which will likely differ vastly from other brick-and-mortar retailers.  If you walk into Tiffany to buy jewelry, the pricing and discount structure will be different from a Kay Jewelers.   Do you really believe that you can exact an extra discount from Starbucks?  Do you expect to get 25 percent off on a new iPhone? 

Pricing strategies in many showrooms are designed to create the illusion of savings.  Showrooms that, as a matter of practice, automatically offer a discount 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.

Seth Godin, in his new book This Is Marketing,  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 Jiwy 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?