How To Make More Money

aka Why Are Some Things So Expensive?

Have you ever wondered why some things are so expensive and other things are so cheap?  This is something I look at all the time.  Deciding what price to charge is a very difficult task for any business owner.  What is the competition? What do they charge?  Why should we charge more or less?  All of this comes into play.

Working with a bakery offers a great example of how something that looks the same can have a hugely different price.  Do you think a $12 cupcake is expensive?  How about a four pack of cupcakes for $3.99?  A six pack for $1.99?  

At then end of the day they are all just sweet bread with frosting aren’t they?  They can all be made better with ice cream, so why should I spend $12 a cupcake at one store when I can get six for $1.99 at the local warehouse center?

What Goes Into The Product Matters

What goes into the cupcakes makes a difference, and the shopping experience does too.  A big theme park near our offices, famous for a mouse really has $12 cupcakes and yes, I buy one on occasion.  There is also my clients bakery with a $6.00 cupcake which I buy a lot more often.  Sometimes I break down and get the $3.99 four pack but that is my bottom line.

Why?  I read the ingredients at each location except the place with the mouse family.  There I know I am paying for the experience and just suck it up.  My clients six dollar cupcakes have just five or six ingredients.  The gluten free version has eight.  More importantly I can pronounce and buy all eight of the ingredients without a chemistry degree.

I once read the list of twenty plus ingredients on the cupcakes at the local supermarket.  I have no idea what is in them after wheat and sugar.

Convenience Matters

In Europe Bakeries dot every little village.  The village buys just about all of the bread from the local baker.  We don’t do that any more in the United States.  I don’t know why, but we seem to think we can save a buck at the local grocery store so we go there.

In Huntington Beach California we still have a small dairy, a real meat only butcher shop and a couple of small bakeries that make bread fresh daily.  My wife doesn’t like to stop at four shops because it isn’t “convenient”.  I’ll do it to support the local small businesses.  Whole Foods won’t even know I wasn’t there.

We also have four cupcake shops within four miles of our house.  If we forget dessert for a party, we’ll run to the closest one, pay $4-6 per cupcake and load up simply because it is convenient and rarely do we have to wait.

Selection Matters

For many businesses, the cost of a wide selection of products becomes prohibitive.  When I ran the Home Theater Stores and Home Technology Centers, I almost bankrupted the place trying to carry everything.  The inventory, staff training, service support and sales goals eventually became completely unmanageable.

Eventually I partnered with a competitor and we tested out some “packages”.  We narrowed it down to three items per category.  Basically a good, better, best.  Yes we would lose a few people who demanded a certain brand of the week they saw on TV or in a magazine.  Once I realized those were not my clients, I could breath and actually find the people that were my clients.

The things you choose to sell or services you choose to offer will narrow or widen your market.  Going to wide without very deep pockets normally isn’t possible.  With a bakery, gluten free in California is almost a given, but how much?  Most stores have two or three flavors and they rotate them to add variety.  The supermarket has one flavor occasionally.  Convenience also matters in selection.

Cake Tahoe Cupcakes

The Experience Matters

The last component sets the price in stone and that is the experience.  The least experiential way to buy a cupcake is in a box of 24 at the local super warehouse.  The most experience heavy way to buy is either a very unique bakery with coffee and bistro tables or of course that theme park hosted by the famous mouse. 

You might be thinking that you don’t have a way to make everyday objects more expensive, but you do.  Look at Candlesticks at the local discount home store like Home Goods, Tuesday Mornings or even Big Lots.  Then go look at the candlesticks at Tiffany, Waterford and Baccarat.

Baccarat has long been a favorite in our house, and most people can’t tell the difference.  Recently the high end crystal candlesticks on our dining room table went back in the box.  The top of my dining room table now has a piece of wire with 8 glass cups and votive candles.  It is hand made by a local artist, and fits the room perfectly.  She took a piece of wire, and $8 worth of glass candle holders and turned it into a candleholder that out priced Tiffany and pushed into Baccarat territory.

Every business has a way to create a better customer experience and charge more for it.  The next time you wonder why things are so expensive, remember this list and ask yourself, “How can I charge more?”