Conversely, there are things for which we’ll pay handsomely
because it’s what we really want – the brand new $30,000
pickup truck in front a mobile home. If we don’t examine an ad-
equate number of buying decisions that our customers make, we
open ourselves to erroneous conclusions about the value image
has to them.
2. Research companies in noncompeting industries that target the
same customer you do and have similar price points. If I were
Nordstrom, I wouldn’t compare my price multiples to Mer-
cedes, as the prices are too disparate – a few hundred dollars to
a $1,000 vs. $30,000 to $90,000 for an automobile. If I made
that comparison, I’d leave money on the table. Instead, I’d com-
pare my prices to Godiva and Ghirardelli chocolates or A.H.
Hirsch bourbon whiskey. The price points are much closer and
they have that top-of-the-line image presence.
3. Using the information from these noncompeting companies,
determine the price multiples they use at various price points
(assuming they offer multiple levels of image enhancement).
The results of your analysis can easily be put into a table format
like that of Table 3-7.
4. Decide which of those price points you’re going to target and
use the highest price multiple you ﬁnd. This is not the time to
be modest. If your offering is superior, you should be compen-
sated more than anyone else.
5. Multiply the premium multiple in Step 4 by the price of the
bare bones, no-frills-attached offering in your industry. In
essence, you’re going to be looking at the WalMart or Aveo in
your industry. You’re going to apply your multiple to their prices
to establish your price.
Now that you now have a methodology for calculating the image value
of your offerings, let’s turn our attention to innovation.
When we look at the market for innovation we see three categories of
64 Pricing for Proﬁt