Years ago I consulted with a Miami PR company that was struggling with profitability. They were a young company, and did excellent work, but they couldn’t seem to make ends meet. And they weren’t just hurting financially, they were also exhausted — their team often worked late into the night and even weekends.
After seeing their amazing portfolio of results, I was SHOCKED to see their P&L: it was clear as day that they were seriously undercharging for their high-touch, high-value services.
I immediately started sharing strategies for raising their prices… but the partners were resistant. They wanted to be able to position themselves as “reasonably priced” and “economical.” In fact these words were part of their core value proposition.
But from the outside looking in, I could see they were missing a big opportunity to rebrand and refocus on a higher end clientele, with a far more profitable value proposition.
But they weren't seeing it, and we were at an impasse. I wasn't sure what to do and how to get through to them. Then one morning, while getting dressed for a big meeting I was facilitating with the entire leadership team, I had an aha! moment.
It happened while I was standing in my closet, picking out clothes, I was staring at my wall of shoeboxes when it hit me. “SHOES!!” I thought, “they'll understand shoes.” They were all women – Miami women, to boot… (no pun intended).
So, I started pulling out shoes and throwing them in a big duffel bag – all kinds of shoes, from the lowliest Havaianna flip flops to my prized red-bottomed Louboutins…
When I got to the meeting, I plopped the big bag on the conference table and said, “Before we get to work on strategy today, we’re going to play a game.”
I pulled out a big fat Sharpie (of course) and drew a cross on the flip chart, an X axis and a Y axis (10th grade geometry). I plotted Value on the Y axis, and Price on the X axis, to create a “price-value matrix.”
So now we had 4 quadrants, and we started plotting each pair of shoes as I pulled them out of the bag, and this is where we ended up…
- In the upper right quadrant were all the shoes that were high price and high perceived value, like the Betsy Johnsons, Jimmy Choos, and Christian Loubotins.
- On the upper left quadrant were all the shoes that were low price and high value, including my Havaianas, Crocs, and Nikes.
- On the lower left were shoes that were low perceived value and low price, i.e., a pair of cheap sandals I bought at a Wal-Mart on my way to a Dave Matthews Concert because it was raining and I didn’t want to ruin my new cowboy boots.
- And, finally, in the lower right corner, high price and LOW value, well, I didn’t actually have anything in that category, so we all just imagined buying a pair of really expensive shoes that fell apart.
By the time I was done with my matrix and we had plotted all my shoes on a graph, the ladies GOT IT.
- They realized there are only 2 spots on the matrix to be successful: the upper right (high value / high price) and the upper left (high value / low price).
- They realized that the upper left quadrant required something they didn’t HAVE and actually didn’t even WANT: VOLUME.
- They realized why they were so exhausted – they had been running a volume model!
- They realized they wanted to be CHRISTIAN LOUBOUTIN, not CROCS.
- They realized if they wanted a boutique PROFITS, they needed boutique PRICING to go along with it.
If you want to make money WITHOUT a volume operation, you need a boutique offering and a boutique price point. That’s where the profit is for small businesses like ours.
And boutique models and pricing come back to one thing… the thing that makes Christian Louboutin stand out and the thing that will protect their profits for years to come: BRANDING.
Christian Louboutin is able to charge (a lot) more than other brands because of the red sole on the bottom of their shoes. That’s their unique differentiator.
If you want to create an awesome brand, a brand that attracts attention and is able to charge higher prices, and stay in the “boutique” quadrant, then having a unique differentiator is critical. It will enable you to charge more AND allow you to have staying power in the marketplace.
For as long as Christian Louboutin exists and for as long as they're the only brand that can have a red sole, they have a much greater chance of being sustainable than other shoe brands.
So, the question for you is: What is your red sole?
This happens to be one of my specialties – helping others identify that unique special thing. If you’d like me to take a crack at helping you with your pricing and positioning, visit this page, and check out a video I created all about growing your business in a way that’s aligned, energy rich and sustainable for the long haul. ANd if you like what you see, go ahead and book a call: