How will you make a profit when customers know everything about your costs? The answer could be about putting a dollar value to access and charging admission to your store.
Don Peppers, owner and partner of the consulting firm Peppers & Rogers Group, in Stamford, California, recently posed this question:
“How will you make a profit when your customers know everything about your costs and pricing and have more or less instant access to your strongest competitors, anywhere in the physical world?”
He offers one intriguing suggestion: Charge admission.
“Don’t laugh, this is exactly what warehouse stores like Sam’s Club and Costco do,” Peppers writes in his recent blog post “The Only Lasting Competitive Advantage Is Extreme Trust” at fastcompany.com.
Sam’s Club and Costco, he says, “charge customers an annual membership fee for the privilege of entering their stores. Other kinds of stores do this on an occasional basis. When the iPhone was first introduced, Apple stores charged admission in order to manage the crowds of customers jamming in to see it.”
As well, Peppers notes that independent bookstores often charge admission to book signings by big-name authors. “It isn’t hard to imagine a retailer charging customers a one-time fee for entry, and refunding that fee against any product bought within, say, 48 hours,” he says.
It’s about putting a dollar value to access.
A 2010 article from the MIT Sloan Management Review archives, “Raise Your Prices!" suggests a similar way of thinking about aligning price to perceived benefit. A manager thinking about profits and pricing ought to “quantify the precise nature of the benefits that your products offer, and to figure out what their tangible value is to the customer, in terms of acquisition cost, operating cost and added value to the end user,” wrote authors Frank V. Cespedes, Elliot B. Ross and Benson P. Shapiro.
“By competing on performance instead of price,” they write, “you shift the battle to where your company’s strengths lie — in the ability to deliver unique benefits.”