Welcome to another strange but true story–told to me twice at the annual meeting of one of America’s premier consulting firms.
This story begins on a sunny September afternoon in Franklin Lakes, New Jersey. An experienced consultant named David called on a Fortune 500 prospect. The prospect was impressed, but balked at David’s $1,750 per day price tag.
Three weeks later, David took a position in the New York office of a well-known national consulting firm. Two days later, he ran into the Franklin Lakes prospect–literally–in line at a hot dog stand inside Yankee Stadium.
“I’m with Juggernaut now,” David told his former prospect.
A week later, that fellow retained David for consulting–at David’s new fee of $2500 per day.
It doesn’t stop there.
Flash forward to another speech in Denver, Colorado, two months later. After the speech, I spotted a 50ish man bee-lining toward me from the back row. He was nearly breathless when he arrived at the front of the stage.
He told me about Charles, a friend who had been shopping for eyeglasses, and found the Ralph Lauren frames he wanted in a store in the Cherry Creek neighborhood. Their price tag read $115.
Charles left the store, climbed in his Camry, and drove to a second eyeglasses store six minutes away. Once inside, he spotted the same frames priced at just $70.
“Why are they only $70?” he asked. “That’s just what our owner decided,” the clerk said.
Charles felt uncertain and left. Two days later he returned, saw that the frames still were marked at $70, again questioned that price with the young clerk, and left.
Three days later, Charles returned to the store for a third time. The day before, the clerk had told the owner to mark up the frames to $115. He did.
Charles saw the tag and bought the glasses.
Outside the auditorium after a speech in Toronto, Canada 11 months later, a man approached me with a comment that leaves me anxious. “I need a word with you.”
I immediately began worrying that my speech offended him.
He returned from the rest room and began his apparent complaint.
“My wife is an interior decorator here in the province,” he said. “Before she read her book, she was charging the going rate here, which was $55 per hour.”
“That sounds attractive,” I said.
“Yes, but she wasn’t that busy. She was billing fewer than 20 hours a week.”
I flinched, feeling a boom was about to fall on me.
“Then she read your book, and decided to start charging $120 an hour. You know what happened?”
Bankruptcy? I wondered.
“Her business has grown so much that now I have to do all the housework.”
These stories demonstrate the remarkable influence of price on a prospect’s decisions. Your price becomes a proxy for quality; a higher price suggests that even though the prospect cannot inspect your service and see its quality, the quality must be there–and the higher the price, the higher the presumed quality.
Some say this seems obvious, yet never ask, “What does our price say about us?”
Watch what your price says.