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Wine, Kobe Beef & Why Pricing Is a Branding Tool

Austin Church

by Austin Church

Oct 29, 2012


One of the best pieces of business wisdom that I have ever learned came from Andrew, a veteran copywriter whose companies specialized in marketing for pharmaceuticals companies.

Soon after I got laid off from my job at a marketing firm, a mutual friend agreed to set up the meeting. In preparation for it, I updated my portfolio and felt very bold in choosing my new freelancing rate:  $40 an hour.

I believed that the quality of my work would speak for itself.

$40 an hour was over twice as much as I had been earning per hour in my salaried position, including benefits, but the firm where I had worked sold my services for $85 an hour. As a freelancer, I could offer the same product for half the price. Surely clients accustomed to paying $85 an hour would be eager to get twice as much for the same price—or the same project for 1/2 of the cost.

Andrew looked at my writing samples, while my heart fluttered in my chest, and then after asking me about my hourly rate, he asked if he could give me some unsolicited advice.

What he said next floored me...

Your work is good, and I could probably rustle up a project for you within a week or two. One of our writers is going back to school."

So far, so good!

"That being said, your hourly rate is too low. You wouldn't be taken seriously in larger markets like Charlotte, Atlanta, and Nashville. If you I were you, I would raise my rates to at least $75 an hour. Today. And if we get a chance to work together, that's what you should charge me."

Now some of you reading this may already be nodding your heads in agreement with Andrew's sage advice, but at the time, I was gobsmacked. He was the first businessman to help me understand the relationship between price and value, and this revelation immediately took up residence in a rather Spartan room of my mind called Business Acumen.

Why do you see proud Range Rover owners intentionally double-park their English-made gas guzzlers in the Whole Foods parking lot? Why do Geo Tracker or Kia Sportage or even Ford Explorer owners not exhibit this same behavior?

People show more respect to things that are expensive.

Cal Tech released a study proving that price affects how people think about wine. People rated wines as “better” and enjoyed drinking them more if they believed those wines were more expensive. But blind taste tests revealed no correlation between price and taste.

When people spend more money on something, they perceive it as being worth more. If price is perceived value, then expensive means valuable, and cheap means, well, cheap.

My relative inexperience in the business world led me to think of my services as a commodity. $40 an hour seemed like a lot of money, and I would have been thrilled to earn that doing work that I enjoyed.

I had assumed that the quality of my work would increase its perceived value at my chosen price point, but Andrew knew my rates would have the opposite effect: my writing would seem of lower quality than it really was. The kind of clients with whom I wanted to work would take one look at the price tag and assume my work was sub-par because if I were any good, then I would charge a premium.

Premium quality both justifies and demands a premium price.

Here's an analogy that might be helpful: If you want people to see who you are and what you do in a certain light, then you have to put in the right windows. Building a brand means creating certain perceptions. You can't be cheap and be perceived as the crème de la crème.

Treat your labor as a commodity, and you will earn a laborer's wage. Think instead of your work in terms of ideal outcomes and the type of experiences and feelings that it creates for your clients—that is, freedom, safety, dependability, timeliness, quality, luxury, status, and respect—and you can charge a lot more. The amazing thing is that these premium-loving clients will often show more respect, make fewer demands, and send you more referrals and repeat business.

Crazy, right?

Certain things really are more important than price. Will you pay extra to sleep on a comfortable mattress and clean sheets in a nice hotel? Probably. Would you pay $180 in Japan for a kilo of authentic Kobe beef, which is not, in fact, exported to the U.S. and which is renowned for its rich flavor, tenderness, and texture? Some people can and do.

Pricing is a powerful branding tool, and smart brands never compete on price alone. As Andrew and many business and marketing gurus have observed, you don't want to compete in a race to the bottom. Even if you win, the only prize is lower profits.

A burger is never just a burger. Why not sell a super premium burger and charge accordingly?

Categories: Business, Growing, Marketing | Tags: branding tool, authentic kobe beef

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