If you needed more evidence that price and value are complex equations, cast an eye in the direction of Apple and their recent iPhone price change. Just 10 weeks after customers camped overnight for the right to pay $599 for the coveted gadget, Apple slashed the price by $200 (no waiting required).
The announcement made the loyalists cranky (or at least the non-iPhone-owners speaking on their behalf). Apple’s first response to the complaints was ”get used to it, it’s technology.” Then they cleverly switched their message, suggesting this was a ”holiday promotion.” Finally, Steve Jobs published an open letter offering his apologies (not for the price drop, but for communicating it poorly), and giving $100 back (in Apple merchandise credit) to ease the pain.
The particulars are less important than the lesson in price and perception. Ten weeks ago, thousands of consumers thought the value received from several hours in line and $599 (not to mention the monthly phone service cost) were well worth the cost. They likely calculated the premium of being first, of waving the iPhone in front of their friends, of casually flashing it in a restaurant or bar. Perhaps they saw the product as the key to a better and more connected life. They made that assessment even knowing that a better version of the same device would be cheaper and easier to get in just a few months.
The ready flow of cash and the sudden twist of fate both underscore the complex equation that defines value and price. When a product or service is also closely tied to a person’s public identity or sense of self, there are even more variables in the mix. Consider, then, cultural consumption. What are people buying when they wait in line at the box office, or absorb the outrageous Ticketmaster fees? What complex value set drives them to spend more than they probably should on a premium touring show, but then balk at a $25 local professional production?
Arts managers are quick to point to price when sales are down and seats are empty. But it isn’t price…it’s perceived value, that drives the final purchase.
You are absolutely right. I have been the ED of 3 orhcestras and certainly have no answer to how to leverage value perception to increase sales.
I can’t even figure out my own emotional buying decisions. Just 3 days ago, I paid $180 each for front section tickets to see Bob Dylan and Elvis Costello perform. Didn’t even think. Had to buy.
But I will balk at spending more than $20 (the price of museum admission, I guess, these days) to see any orchestra perform anywhere.
Perhaps the most important issue is scarcity: Dylan and Costello together? maybe the only time it will happen. Gotta go. Can’t miss it.
An orchestra concert? Well, don’t worry. Ho hum. They play at least 3 times a week, seemingly every week of the year. All looks the same, except for the tunes. Maybe orchestra concerts have become commodities.
At least in my opinion, therein lies one answer, although this has more to do with real value rather than perceived value.
Scarcity = value.
Interesting, Andrew. The Arts Council here in England has just published a book on pricing and value, “Call It A Tenner”. You can downlaod it free at:
http://www.artscouncil.org.uk/publications/publications.php
There are a few excellent articles in it which probe this question further.