The Mattress Saga: Episode I - Value-Based Pricing Doesn't Always Work

Friday, January 15, 2016

Everyone seems to think that value-based pricing is the optimal approach in every case. It's not. I made an argument against the overuse of value-based pricing already, but I think a return to the argument is in order.

My new apartment was a barren shell. I needed to buy a mattress, so off to the bedding store I went. By all rights, my entrance into the showroom should have heralded the easiest sale in the history of selling. I lived across the street from the store, and I intended to buy a bed immediately.

My needs were basic. I've slept on cheap beds, tile floors, cramped airplanes and tents. No matter my location, I slept like a baby. Mattress quality just isn't that important to me. I have no need for a Luxury Platinum Sleeper System™; a basic bed is good enough.

Nevertheless, the saleswoman subjected me to a series of long-winded speeches, pressured me to lie down on different beds and forced me to listen to all sorts of "important facts" about the biological sleep process. Throughout her pitch, she continued to tell me how important my decision would be. She stressed how the right bed would improve my physical health and mental well-being. In fact, it was irresponsible of me to even think about my budget so early in the process.

Increasingly irritable, I eventually left without making any purchase at all. The easiest sale turned into a lost opportunity for profit. I went online and placed an order for a basic model from another supplier.

Some of you might say that the saleswoman hadn't failed. Perhaps "cheapskate" just wasn't the store's target demographic. While they may have been targeting more extravagant customers, I know for a fact that the showroom contained the very same model that I purchased from the competition. It probably still sits in the store, taking up valuable space to this day.

The value-based strategy cost the firm a sale, reduced its reputation in my mind and wasted both the saleswoman's time and mine. You can't sell by value unless your potential customer is willing to pay for value.

No matter the value you place on your bedding, you probably realize that a coherent pricing strategy is vital to your business. Better pricing will lead to higher profits and strategic dominance.

Want to learn more? Read my book on software pricing or contact me for a pricing consultation.