THE PRICE OF a product or service is set by its owner, but the true value of it isn’t determined until someone buys it. Often, we think that the price of an item is too high, but if someone buys it, he or she has valued it differently than the one who rejected it.
In jewelry, I have found that most people don’t really know what the price of something should be. The more basic a product — say, a 1-carat G, VS2, Triple X round brilliant diamond — the more shoppable the product is and the more price competitive it is. The more the product differs from the ordinary — say with a unique design, a fancy cut, a colored gemstone or numerous diamonds — the more difficult it is for people to comparison shop and therefore to put a price on it.
Even if you asked a group of jewelers what something should sell for, you will invariably get a wide range of estimates.
When I look at a jewelry item, I ask myself if it looks like it’s worth the asking price. Sometimes I see products in stores that seem overpriced, while at other times I see products that have the look and feel of something much more expensive. I use this test to see if more margin can be squeezed out of an item, or if we’ve hit the peak of what a jeweler can ask for it. Of course, the key to all this is whether a product or service sells.
Try this exercise in your weekly store meetings. Pass around a number of items each week and ask your sales staff if the price is too high, too low, or just right based on the look and feel of the product. You might get some very interesting answers, and insights, from the people on your team.
When I price my services, about half the time a potential engagement falls through. Was my price too high, or was my service just unaffordable to that individual? The good news is that the other half of the time, the price is accepted, so the value is confirmed by those who accept the price offered. If everyone I encounter agrees to my proposed price, my prices are probably too low. If no one accepted my proposals, that would tell me that either my prices are too high, or I’m doing a poor job of selling.
You can’t sell everyone on your product or service, but you can do a better job of selling. Increasing your closing rate and improving your add-on sales costs no more in marketing but create many more sales and more efficiency in your business.
Make sure your products and services represent great value to your customers by constantly evaluating them. One jeweler told me recently that he didn’t have time to evaluate his merchandise and to re-price his products. I wondered where he spent his time. Probably working in the “weeds” of his business instead of working “on” his business.
Price and value are not the same. Price is set by an owner, but value is determined by the purchaser. Make sure your products and services reflect great value to your customers.