I’ve got a quick story for you today, and it’s not just about beer and burgers, so bear with me!)
I was at Shirley beer festival the other week, just a few minutes walk from my house at the local rugby club, and it was a beautiful evening.
The sun was out, the festival was packed out. 1,000+ people having a few pints of ale – good times!
As you do after a couple of beers, I started to get hungry, so I got in the queue for a burger from the barbecue.
Forty-five minutes later, I got to the front of the queue – that’s how long it was.
When I got there, my mate Ruffy was flipping the burgers, so we had a little chat and I got my burger.
I then went to pay for it, and I couldn’t believe the price.
£3.50. They were charging just £3.50 for a burger at an event where there was no other food on sale anywhere. And that’s really the point of today’s article: the importance of pricing our products correctly.
Ruffy and his burger flipping mates could have made a whole lot more money for their rugby club – but they just didn’t price their product properly.
Let me tell you why:
Firstly, the queue was 45 minutes long – people really, really wanted a burger.
Demand was high, really high, which (should have) added more value to the product.
If you think about a company like Apple, they’re able to sell a phone for four or five hundred pounds despite the manufacturing cost being a tiny percentage of that figure because the demand for their product is incredibly high.
The burger is the same. The value is not just a bun, some meat and a bit of cheese – in the context it was being sold in, it was a desirable food and people were hungry.
Secondly, it was the only option available.
When you go to a service station, and everything costs just a little bit more, you still buy food and drink there don’t you?
The only other option is to go without, and that’s exactly the same situation as at the beer festival.
Either you have a burger, or you go hungry. As most people at the festival didn’t want to go hungry, most people went for the burger, and they still would have done, even if it was a couple of quid more.
When I asked Ruffy why the club priced the burgers at £3.50, his answer was that they didn’t think people would pay more than that for a burger, and it’s this sort of thinking that’s holding a lot of us back in business.
We price with fear, rather than with confidence.
Rather than saying, “Look, I know my product is really good, and I know I’m the only one able to provide what I provide, and I’m going to price it accordingly”, we get scared and price lower than we should.
Don’t get me wrong, you can’t exploit people here. There will always be a ceiling on what people would pay for a ‘Rugby Club Cheese and Bacon Burger’ without feeling resentment towards the club, but the rugby club were somewhere between 50p and £1.50 out.
Lots of you will have heard the famous Gary Halbert story about the hamburger stand and the starving crowd. If you haven’t, Gary used to talk to his students about competing hamburger stands. He’d ask them a question:
“If you were running a hamburger stand and competing with another stand and you could have any advantage, what would you go for?
Some said the best burger; some said location, some said sesame seed buns and A LOT of people said price.
Gary said that the advantage he’d go for would beat all of those hands down; he’d go for a ‘starving crowd’, because if he had that, then it would trump all the rest.
If you think about this, it makes perfect sense, and it just happens to be very relevant when it comes to Ruffy and his burgers at the beer festival. If you’ve got really hungry people and a way of serving them, then those other marginal gains are much less important.
Ruffy pretty much literally had a starving crowd, the ultimate advantage, and yet he didn’t monetise that advantage as effectively as he could.
The take home point for all of us is two fold really:
1 – It’s really important for us to price our products according to the VALUE they offer, as opposed to pricing them pessimistically at what we think people will pay for them.
2 – When we’re looking to market our products and services, we should be looking to find our equivalent of the ‘starving crowd’ – the kind of people who are most likely to be ‘starving’ for what we offer. Doing this will make it A LOT easier for us to sell with less friction AND at the price we want to sell for.
So that’s my little message for you today, hope you enjoyed it and you can find a way to apply it in your business.