Marketing lessons from a 310-million-year-old fossil.
Researchers at Stanford Graduate School of Business have proven what most of us suspected long ago. Expensive wine tastes better!
Researchers used MRIs to study Caltech grad students’ brains as they swallowed five red wines priced at $5, $10, $35, $45, and $90 per bottle. They found that as the price of the wine rose, so did the activity in the subjects’ medial orbitofrontal cortexes. (Apparently, that’s the part of the brain that experiences pleasure – but just reading about it gives me a headache.)
The “catch,” of course, is that the subjects didn’t drink five different wines. They drank three. The $45 wine was really the $5 wine. And the $10 wine was really the $90 wine.
So why did the subjects like the $5 wine more when they thought it was $45? And why did the $90 wine taste like swill when they thought it cost $10? Researchers concluded that the perceived price of the wine actually affected real quality – at least, “real” as interpreted by the medial orbito . . . er, brain.
People are willing to believe pretty much anything you tell them with a straight face. I used to live in one of those “Desperate Housewives” subdivisions where everyone has two big dogs (usually Labradors or Golden Retrievers. So we were oddballs with just one dog – a 7-pound Chihuahua at that.
His name was Agador. He was a cute little guy. (He still is, actually, he just lives with my ex.) He’s about as intelligent as you’d expect from a dog with a brain the size of a cranberry. And pound for pound he can keep up with any neighborhood dog.
But I was still embarrassed to tell people we had a Chihuahua. So I called him a Guatemalan weiner dog. You’d be amazed at how many people hear that and nod knowingly, like they’ve loved Guatemalan weiner dogs all their lives!
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So what’s the lesson? (If you answered “you can fool some of the people some of the time,” well, you’re right — but that’s not what I’m looking for.)
The real lesson is that the price you charge for your service affects the value your clients see in it. If you’re offering a $90 bottle of wine – and you want your clients to value it at $90 – don’t pour it into a cardboard box with a $10 price tag!
Do you give your clients more value than your competitors down the street?
Are you charging what you’re worth?
Or are you pouring $90 wine into a $10 cardboard box?
(Hey, if you really are cheap, embrace it. Remember those old Paul Masson TV commercials with Orson Welles saying “We will sell no wine before its time”? Betcha didn’t know that Paul stomped on the grapes himself at 9AM – and by 3:30 it was in the freezer at your 7-11!)
Clients will pay more for your service if they see you give them more. The Stanford study proves they’ll even feel better paying more!
Right now, as we’re launching a new “season” in the midst of a global pandemic, it can be tempting to discount your prices to attract or keep clients. But competing on price is a losing proposition unless you offer the lowest price of all. And how many of you started your practice to be the Walmart of tax prep?
It’s better to compete on value. Give your clients a reason to do business with you, not your competition. Give them a reason to pay more. And they will. Really, they will.
Tax planning is just the tool you need. AICPA surveys show clients are dying for proactive concepts and strategies from their accountants. Give them the tax savings they want and they’ll give you the premium fees you want!
Are you nervous about charging higher fees? Don’t be. The key is showing confidence in your value – and when you do that, you sell yourself, not your price. You should find it much easier selling yourself than your fee.
The Briefs is a weekly column on marketing and business planning for tax professionals and financial advisors looking to better serve clients and grow their business.
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