November 11, 2008

If you are charging premium for your product or service, make sure that you deliver higher perceived value than your competitors who don't charge a premium. If you miss even once on delivering on expectations associated with a premium price, chances are very high that you will not see your customer again.

There are a few salons in the residential locality where I reside. A month or so back, I visited one glitzy looking salon for a hair cut. After the hair cut, I had to pay almost double of what other salons in the locality charged. Hair cut that I received was nothing great. It was similar, perhaps a bit inferior, to what other salons in the locality delivered. The only difference in this salon was that the barbers were well dressed and looked smart. Everything else was constant vis-a-vis other salons in my locality. I vowed not to visit that salon again.

Today I went for another hair cut. But I didn't visit the salon I visited last. I went to the salon where I normally go. I paid half of what I paid last time but came out more satisfied by the experience and the hair cut!

Lesson to be learnt: Premium pricing doesn't make a product or a service premium; perceived value vis-a-vis price paid does.