Why pricing is the hardest part of the marketing mix.
Setting a price is one of the four critical parts of the marketing mix. If you set a price that is higher than the consumer expects or can pay for the value they perceive, you will sell fewer units. If you set it too low, the audience might think your (perfectly good) product has no value and will not buy. There’s obviously a sweet spot for things like this. But that does not take into consideration the fact that everyone values things in very different ways. It’s complex. Case in point:
My wife likes to collect stones with lines through them. They are in unlimited supply and are free to pick up from the beach, but to her, they are incredibly valuable — we have thousands of such stones in our home. Perhaps that means we are rich?
I collect vintage cast iron and it’s a similar situation. They are out there in junk shops and estate sales for next to nothing. When you see them for less money, they are being sold by people who do not value them.
I once bought two №10 pans (One Griswold, one unmarked Wagner) for $40 from a woman named Caroline who met me in a Stop&Shop parking lot. She handed them over to me in a torn shopping bag as if she was giving me a dead animal. $40 was so much more valuable to her than those pans. I can only guess at the reason. I know collectors who would have paid $100 apiece for those pieces. They have become my kitchen workhorses and I would likely never part with them for any amount of money.
Vintage cast iron is a free and unregulated market. Like used guitars and automobiles. Pieces are only worth what others will pay for them.
But, there’s another heuristic at play here. It’s called the “Endowment Effect.” This heuristic states that people are, in general, willing to pay less for an object than they are willing to accept for the same object. Weird, huh? This defies logic, but it is hard-wired into the human brain.
This makes for some interesting market dynamics. It also means the best person to buy something like cast iron from is the widow of a collector who shook her head every time her spouse brought home another piece of cast iron. To them, it’s a dead animal that needs to be disposed of. If anyone wants my collection, you can buy them for short money from my wife when I pass away. But don’t even think about making an offer on the stones with the lines through them.
You simply can’t afford them.
Grant Sanders is a father, husband, dog trainer, short-order cook, cold-weather swimmer, electric piano and tenor guitar restorer, jump rope enthusiast, podcaster, ad industry veteran, and the founder/lead of SAND. Which, it so happens, operates under a creative and strategic agency model that expands and contracts to meet the needs of various clients. It’s built to work speedily and is tailor-made for a global viral apocalypse, interestingly.