The $300,000 Watch That Doesn’t Tell Time

I'm intrigued, and cannot stop thinking about, this limited edition Swiss watch launched back at the end of April 2008 for a whopping $300,000 - it sold out in 48 hours. So while this is a very extreme and unusual consumer goods/luxury goods example, what is there to learn here for companies selling product or services in the business to business space? Well, what it means is that if you or your company are able to identify a segment of your marketplace with needs and desires something you can exclusively meet, you have pricing power; you set the price; you don't discount; you don't negotiate - you increase your profits.

One of the objectives of best practice pricing is just to identify such a segment, to understand that segments' willingness to pay, and leverage that knowledge into higher profits.

Now, in this case, was $300,000 the optimum price? Probably not. If the vendor sold out in 48 hours it really means they were too cheap - how ever odd that sounds for those of us who would be reluctant to spend that kind of money on a watch. It also means that the vendor guessed "the best price" as opposed to useing one of the several methods available for companies to accurately define willingness to pay. The vendor could have optimized the price and thus captured the maximum of that willingness to pay, but did not. As a result they lost several millions of dollars in real profit.

Your company have the same choice - use guesswork, often expressed as "I know what the market is willing to pay for this new product" or do the work to discover the actual value of your product or service, and capture the profits you are entitled to!

With warm summer regards to the reader,

Per Sjofors

Founder, Managing Partner

Atenga Inc

www.atenga.com