Value Added Stories to Increase Price

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Ask a CEO if they want to spend a pile of money on an analysis of their company's story, and they'll probably throw you out of their office. But if you tell them that you have a powerful insight that can help them raise the prices on all of their products, they might ask you over to their house for dinner. Money talks, in other words. Unfortunately, in most companies, the power of story to affect pricing still remains unknown, or at least it's vastly under-utilized.

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Value Added Stories to Increase Price

  1. 1. Media Partner of Join my contest on making up VALUE ADDED STORIES TO INCREASE PRICE It has been a long time since I sent you an article written by someone else. This is on how telling a meaningful story or a value added story can add value to the customer and help sell the product (by Ty Montague). In the past, I have talked about decommoditisation. So, while the examples given by Ty make sense, what story do you tell for cement, or fertiliser, or salt or vegetables? Well for vegetables, I can differentiate, for cement can I and how? I am willing to give a prize (of two customer value management books) for the best ideas on value adding stories to tell about your commodity product. So enter my contest. You have to articulate a value added story on cement (and/or another product you like) that will increase its price and demand. Gautam Mahajan, President-Customer Value Foundation M: +91 9810060368 Read on and come back to me If You Want to Raise Prices, Tell a Better Story Ask a CEO if they want to spend a pile of money on an analysis of their company's story, and they'll probably throw you out of their office. But if you tell them that you have a powerful insight that can help them raise the prices on all of their products, they might ask you over to their house for dinner. Money talks, in other words. Unfortunately, in most companies, the power of story to affect pricing still remains unknown, or at least it's vastly under-utilized. Pricing strategy usually follows one of four tracks. Bottom up: calculate the cost of everything that goes into making the product, and add a fair margin on top. Sideways in: analyse and adopt the price of competitors' products. Top down: target a demographic or economic segment, and engineer the product to meet that price. Or dynamic: use a complex, real-time calculation to gauge supply and demand, usually with the help of an algorithm. What you almost never hear about is a fifth track, which I call story analysis: an analysis of a product's capabilities to fulfil a profound human need, to tell a story that gives your customers' lives richer meaning. In a world of abundance, what your product does for your customers is important, but not nearly as important as what your product means to them. And this second part — the story of your product — is what yields the greatest pricing power of all. Not convinced? Consider this story.
  2. 2. Back in the summer of 2006, New York Times Magazine columnist Rob Walker was mulling the question of what makes one object more valuable than another. What makes one pair of shoes more valuable than another pair if they both deliver on the functional basics of comfort, durability, and protection? Why does one piece of art cost $8,000,000 and another, $100? What makes one toaster worth $20 and another worth nearly $400 if they both make toast? As Walker turned these questions over in his mind he concluded that it is not the objects themselves, but the context, the provenance of the objects, that generates value. In other words, the value isn't contained in the objects themselves, but in the story or the meaning that the objects represent to the owner. Walker decided to test this conclusion in a simple and direct way. With the help of a friend, he began buying random, worthless, or low-value objects at tag sales and thrift shops. The cost of the objects ranged from one to four dollars. An old wooden mallet. A lost hotel room key. A plastic banana. These were true castoffs with little or no intrinsic worth. Next, Walker asked some unknown writers to each write a short story that contained one of the objects. The stories weren't about the objects, per se; but they helped to place them in a human context, to give them new meaning. When Walker put the objects, along with their accompanying stories, up for sale on eBay, the results were astonishing. On average, the value of the objects rose 2,700%. That's not a typo: 2,700%. A miniature jar of mayonnaise he had purchased for less than a dollar sold for $51.00. A cracked ceramic horse head purchased for $1.29 sold for $46.00. The value of these formerly abandoned or forsaken objects suddenly and mysteriously skyrocketed when they were accompanied by a story. The project was so successful (and so interesting) that they have now repeated it 5 times and put all the results up on the web. It is also a book. Walker's experiment reminds us in a clear and extremely tangible way how the concept of value works in the human brain: a can opener is a can opener is a can opener until it is a can opener designed by Michael Graves and a part of the permanent collection of the Museum of Modern Art. A shoe is a shoe is a shoe until it is a pair of TOMS shoes. For every pair that I buy a child who has never been able to afford shoes gets a free pair as well. Suddenly, these objects are part of an inspiring narrative — one that I can use to reveal something meaningful about myself to others. That's something I am willing to pay for. That's where real pricing power comes from. And as the number of products and brands in the world proliferate at an ever-accelerating pace, the power is only increasing. In 1997, there were 2.5 million brands in the world. Today? The number is approaching 10 million. So the trend is toward rapid commoditization of just about everything. In a world of almost overwhelming abundance, an authentic, meaning-rich story becomes the most important ingredient to drive a company's margins up.
  3. 3. Gautam Mahajan is a thought leader in Creating Value. He can be reached at mahajan@customervaluefoundation.com Gautam Mahajan, President-Customer Value Foundation M: +91 9810060368 Tel: 11-26831226, Fax: 11-26929055 email: mahajan@customervaluefoundation.com website: http://www.customervaluefoundation.com Customer Value foundation (CVF) helps companies to Create Value and profit by Creating Value for the customers, employee and for each person working with the companies. Total Customer Value Management (TCVM) transform the entire company to focus on Creating Value for the customer by aligning each person's role in Creating Customer Value and getting shareholder wealth and Value.

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