Monday, 15 October 2012
Who says you have to be cheap?
The pure Smithian (Adam Smith) economic model would assert that the industrialists who minimize costs and maximize outputs are going to going to prosper. Those who have the lowest price will win the most customers, right?
I have a new favorite restaurant in Red Deer, called The Rock. I was looking for a quick lunch and among the Quiznos, McDonalds and such, I stumbled upon a nice-looking restaurant called “The Rock Woodfire Pizza and Grill”. Entering was like stepping into another world with classic rock music, crumbling brick half-walls, guitars and other rock memorabilia. My lunch cost more than what I would have paid at Subway or Timmies, but the experience was worth return trips.
Now, when someone accuses you of having a more expensive 1ct diamond than the guy down the street, we always assume it has to do with the quality of the diamond. If the experience of visiting your store is consistently fantastic, the client could interpret that to mean that your diamonds are of higher quality, and worth more. If you have the same bland décor, and you greet them with a lukewarm “my I help you,” there’s no reason to think that your product is any different. Hundreds of people every day walk into your Starbucks and pay 20 to 40% more for a cup of coffee. I’ve got to tell you that I was happy to acquire a taste for their bold roasts in order to enjoy their free WiFi and great atmosphere.
Forget Adam Smith. Go out there and seek to create an experience that makes people want to pay your higher price. Oh, and deliver great value for better product than your competitor at the same time. That will really put another nail in their coffin!