TapRun Consulting

Pricing Mistakes Can Kill People

by Adam Juda on Wednesday, December 2, 2015

Although Vin Diesel's understanding of pricing economics is both noteworthy and unexpected, I think that business owners would be better served to examine the life of another Hollywood player for pricing advice: Moses Horwitz (better known as Moe Howard, leader of The Three Stooges). His life should serve as a cautionary tale for entrepreneurs and business owners alike.

Famous for decades, many would be surprised to learn that his comedic team's finances were in shambles. The actors eked out mediocre wages when they should have been millionaires many times over.

For twenty-three years, Columbia Pictures convinced the trio that their films were poorly received and of minimal economic value. In fact, nothing could have been further from the truth. Their films were beloved by audiences, and their pictures proved so popular that the studio routinely used them as bargaining tools in business dealings.

How could the team have gotten their business strategy so wrong? It was partially due to the monopsony relationship they had with the movie studio. In a market with a single buyer, many suppliers hyperfocus on pleasing their customer, rather than seeking out new buyers. In this case, the group focused on their craft when they should have focused on their business.

In the end, fear and a lack of understanding led the trio to never receive the income that they could have demanded. In fact, for the entirety of their twenty-three year career with Columbia Pictures, they never even increased their prices!

Now this tale isn't just a matter of money. As Curly's health went into decline, economic pressures forced him to continue acting. The increased levels of stress and activity worsened his deteriorating health and led to a debilitating stroke. Similarly, both Larry and Moe were forced to work up until their deaths as well.

The team's pricing strategy forced them to work harder than they needed. It forced them to cut corners when making their films. Most importantly, it forced them to work for customers who treated them without respect. They suffered not because of a lack of talent but because of an error in pricing.

The Three Stooges earned pennies on the dollar and literally worked themselves to death in the process. Yes, they were successful, but they proved unable to capture much of the value that they generated.

Don't follow in their footsteps. Price your products appropriately and enjoy your life.

Don't be a stooge. Let me help you! Contact me for help fixing your pricing strategy or read my book on software pricing!