I am intrigued by unnecessarily overpriced items such as the Black Fox Chapka hat from Hudson’s Bay in Canada, which retails for $899 CDN. Although I really did love this hat, I could not justify spending nearly one-thousand dollars for a hat I could not see myself wearing more than a handful of times. I will admit the hat looks pretty silly on me, but in the defense of the designer, it was super comfortable and warm.
A Hermes women’s handbag can cost upwards of $20,000. For those who do not know, Hermes is a French high fashion luxury goods manufacturer. Even though I feel a handbag for $20,000 is unnecessarily overpriced, some wealthier customers do purchase these items regularly. In 2013, Hermes International SCA was trading their stock for roughly $250 and today the stock is trading for roughly $430. The company is operating in such a way where they are growing their business and hitting their targets.
Another example is Ferrari, which is an Italian sports car manufacturer based in Maranello, Italy. The price point of Ferrari ranges from $188k and go upwards of $400k. These are not your average Honda Civic, which starts at around $18k. The Ferrari manufacturers a super fast car and has a very-well known brand name around the world. In 2016, Ferrari stock was trading at roughly $46 and today it is trading at around $125. This is another example of a luxury manufacturer, which is selling their products for a high dollar value, but still hitting their targets and growing their company.
There is also Apple, which manufactures iPhones, MacBooks, and Apple Watches to name just a few. These products are priced significantly higher than their competitors’ products. You could even argue their competitor products perform better from a technical specification perspective. In 2013, Apple was trading for roughly $55. Today Apple is trading for about $167. Apple has a huge fanbase willing to preorder their products before actually even seeing it in person. I am one of these people. This is the power of their brand and marketing strategy.
If you have a business, which produces a product of course price point is important, but if your product is truly superior in quality to your competitors’ product, you may be able to get away with charging more. I still think Hermes items selling for $20,000 are ridiculous. I think a Ferrari selling for $200k is less ridiculous because it is a super fast sports car and I want it. I would say 9 out of every 10 guys would spend $200k on a Ferrari if they had the money. The Ferrari brand itself further solidifies the justification for spending $200k on a car. If a car had the same exact specs as the Ferrari, but did not have the Ferrari name, I do not think it would sell for $200k nor should it.
Try thinking about your brand and understanding what makes your product sell. Does your brand have enough pull to sell almost anything under its’ umbrella? Or is the brand not big enough to achieve this? With brands comes expectations. With a good brand, the unnecessarily overpriced becomes acceptable in some situations. Let me know your thoughts and tell me if I am way off? I am sure there are some more examples of this out there. I think it is well worth spending some more time thinking about.