You have nailed it, Adam. And, it does make sense. As you say, "You get what you pay for". Nobody goes to 'Crazy Clarks' expecting the same quality of goods as you would expect from David Jones or Grace Brothers.
With regards to pricing non-commodity products such as professional and personal services, the value
is determined by the buyer not the seller.
I didn't say 'price', I said 'value'.
Every client wants to save money and cut the price; but no client wants to scrimp on the value they receive.
By allowing the client to determine and inform you of the value, you are able to then establish price.
Would anyone in their right mind price a car at $660,000? Bentley does and have sold over 10,000 cars and 138 of them in Australasia in 2007.
Would anyone in their right mind price a Sydney hotel room at $2,000 per night? InterContinental does. No idea how many times this room gets booked in a year, but I personally have used it for specific business reasons over a dozen times in the last three years.
Would anyone in their right mind price a 6-month coaching/mentoring program at $7,500 + GST? Ric Willmot
does. I have had over 200 people from 9 different countries graduate through the program in the last four years with over 50 of them participating in the $7,500 Target Program. Some are repeat offenders!
Much of my consulting work commences with advising that fees are dependent on two criteria:
1. Value provided is in the perception of the buyer
2. The intent of the buyer and the service provider is to act ethically
Many service providers fail to comprehend that perceived value
is the basis of the fee and that we must translate the importance of our advice into long-term gains for the client, in the client's perception
Other than that, I don't feel strongly about it!
Some of you may wish to read my article: The Price is Wrong
published in Queensland Business Review Magazine. Fourth article down the list.