High Price+Lower Quality=Best Value

Most customers define "value" as "the most product for the lowest price." However, selling value does NOT mean pandering to that belief. The entire point of value selling is to make a lower price irrelevant. One way of doing this is to raise your price so that it's MUCH higher than the competition's prices. As long as there's no objective way to make direct comparison, the higher price can actually drive MORE sales, even if the product you're selling is lower quality, or the same quality as the competitive offering.

Turns out that the customer belief that "value" means "most product for the lowest price" belief has a natural corollary, which is: "the highest priced product must be the best."

Because of this, it's sometimes possible to increase the saleability of a product by offering it at a price that's MUCH higher than the competition. Customers assume that because the price is so much higher, the product MUST be radically better.

For example, I know two authors who both entered the speaking circuit at the same time. Their books were similar, and had similar sales figures, and the two were roughly comparable to each other in terms of experience and speaking talent. The first author charged $1,000 for a keynote, while the second author charged $10,000. The first author got nibbles and a smattering of gigs, while the second author booked his speaking calendar a year in advance.

The reason was simple. The people who hire keynote speakers naturally assumed that an author who charged $10,000 would HAVE TO BE ten times better than one who charged $1,000.

Similarly, the world of luxury goods is full of crappy products that cost an arm and leg -- and sell more because of it. For example, I've seen $500 neckties that were machine-stitched (badly) and ready to fall apart. People with lots of money buy those products BECAUSE they're high-priced... and for no other objective reason.

The same is true in high tech. I just heard a story about how Sony charges $900 for a memory card that you can emulate with a $40 card and a $30 adapter. However, since the card is used on a device that's critical to business success (high end video), Sony has got no lack of businesses willing to pony up the $900 to get "the best."

If Sony were charging $90, I have no doubt that MORE people would by buying the off-brand card and the adapter. They'd figure that if the difference between the Sony solution and the off-brand solution was actually important, it would command more than a $20 premium. The higher price is thus driving MORE sales and more revenue, too.

What's happening in these cases is that the radically higher price is actually creating value in the customer's mind. The customer is valuing the fact that the product costs more, regardless of whether the price reflects any objective assessment of the amount of product that the customer is receiving for the price.

This is not cheating the customer. If the customer values a high price, selling at a higher price is actually helping the customer. In fact, the customer may end up feeling better about the purchase simply because it was so expensive.

Now, this is not to say that if the customer finds the IDENTICAL product for cheaper, the customer won't feel ripped off. But if there's no objective way to make a comparison, chances are the customer will be perfectly happy to pay a lot more for a product that's arguably of lower quality, in a purely objective sense.

And it's your job to keep the customer happy, right?