Sales Tip - The Price of Lobster
We can learn a lot about premium pricing from the way restaurants price lobster. In an article by James Surowiecki in the current issue of The New Yorker, a huge harvest of lobsters has sent wholesale prices to as low as $2.20 a pound. That's down from about $6 in 2005. Yet restaurants have held the price on lobster.
The perception they want to maintain is lobster is a premium product. If they price it too low:
-- Customers may think there is something wrong with it.
-- Lobster would be a hard sell if the wholesale prices rise and the restaurant needs to raise its price.
-- It may make other items on their menu look too expensive by comparison.
In some cases, spot radio has become a commodity much like wholesale lobster, yet many stations sell at a premium rate. Price your inventory too low and:
-- Clients may think there is something wrong with it.
-- It would be a hard sell if demand rises and you need to raise your rate.
-- It may make your premium opportunities (sports play-by-play, event sponsorships, digital) look too expensive by comparison.
Think about what services you can cook up along with the spots you sell to deserve a premium: superior customer service, upgraded dayparts, digital consultation, marketing information, creative services...
It's much like restaurants providing a perceived value with a lobster dinner. And as far as I'm concerned, it's well worth a premium for me to not have to cook a lobster.
Source: John Potter, SVP/Professional Development, RAB