Price Versus Value; Part One

Is it ever appropriate to pay more? Can paying more be a negative? We will explore these questions with two experiences I had a few days ago.

My good friend Jason Cruise and I enjoyed lunch at one of our favorite restaurants last Friday. We know the owner who has been successful in this down economy while other food establishments have closed their doors. He stopped by our table to ask our thoughts on a business decision he is contemplating.

He asked if he should begin charging fifteen cents for water to recoup the cost of the cup. He went on to explain that the restaurant business is a business of nickels, dimes and pennies. In other words, you have to measure all of your costs to succeed.

I gave my response immediately. Absolutely not. Every restaurant near him provides water for free and this would appear as a negative to his customers. Here our some of our thoughts:

• He could bury the cost of the cup in the food. I did not even know how much he charged me and raising the price of the meal by fifteen cents would never be noticed.
• He could use a cheaper cup with a different look. Many food establishments do this to differentiate who is drinking water.
• He could give away free water and charge for bottled water with a portion of the proceeds going to his favorite charity.

Why should he go to this trouble? Why not just charge fifteen cents and forget about it? I asked him, “How much is a customer worth and is it worth the risk?”

It also concerned me that his customers may perceive that the establishment may be in financial trouble. It is difficult to change perceptions.

I believe it is your responsibility to make your business profitable. Also, I do not think you should give everything away. Just be cognizant of how your customer may perceive it.

Let me know your thoughts on this subject, especially if you disagree with my opinion. Next week, in Part Two, we will explore when a customer will pay more.

Have a great week!

Pierce