Pricing strategy · Marketing Strategy

How to "value" a beautiful product?

Mark Graham President & CEO at Caiman, Inc.

March 29th, 2016

We have recently brought to market a mobile device charging and connectivity product targeted at the hospitality industry. Our design allows for cost reductions/efficiencies over alternatives, improved guest experience/reviews, branding loyalty, andincreased revenue. In short, measureable and significant contributions to the bottom line with reduced effort required over the current.

Our initialthought was to target the obvious hard value proposition mentioned aboveto hotel brands and hotel owners. Strangely, even though they are shown significant real monetary value with little to no effort they don't seem to care much.

Recently we started to change our approach and emphasize one other quality...our product is beautiful. This has caused tremendous interest - the emotional response winning over the hard value proposition. Notwithstanding we are now compelled to come up with value pricing based on appearance in a B2B world.

Any thoughts on valuing/pricing for appearance?

Michael Brill Technology startup exec focused on AI-driven products

March 29th, 2016

The value is (R+M)/2 or $31.92, whichever is larger... seriously, nobody here can value "beautiful product" in the abstract. If you want some generic metric then find a handful of Apple/Xiaomi dichotomies, average those ratios and there you go.

But pricing is dependent on your competitive positioning. Understand what competitors charge, whether you're a premium or value product, triangulate that with your COGS, market share goals and customer economics, and you'll have a price range. Test that with customers. If you're going after premium then iterate until you lose ~ 20% of your business due to pricing and that's probably your best pricing.

Also, don't think about your product as a beautiful product that you sell to a company. Think about what this enables that company to present to their customers. Even though you're selling to a business, you have to remember that your product makes those businesses cool to their customers. That has a ton of value - probably well-exceeding the operational cost reduction you provide.


Nigel Dessau Chief Marketing Officer at Wellsmith, LLC

March 29th, 2016

I would really be sure you understand your value proposition. Look up how to do one if you don't know. It will help you be clear of if your value is aligned to market need and how it looks compared to others. Then you will have a better idea on how to price it. Get your Value Prop wrong and your pricing will miss too.

Kyle Bailey Managing Director at Frontburner Marketing, Speaker, Author

March 29th, 2016

Here are a few questions I'd want to know so that I can contribute intelligently, if you're willing to share: - you said you pitched brands and owners, but what specific positions did you pitch? I'm assuming C-suite, but what positions exactly? Every position up the purchase chain in a corporation has a different set of problems to solve, so saying that they were "shown value" doesn't really mean anything without knowing who "they" are/were - Who has perceived the beauty value prop? Who has shown interest? Can you interview them? Getting their perception is critical. - Next, will they (the people who have "seen the beauty") buy? CAN they buy? If so, - what problem does this solve for them? - can you put product out in exchange for objective feedback? Sincerely, Kyle Bailey Managing Director Frontburner Marketing www.frontburnermarketing.net 512-876-9111 - *Facebook* /thekylebailey - *Twitter* @thekylebailey - *LinkedIn* /thekylebailey

Mark Graham President & CEO at Caiman, Inc.

March 29th, 2016

to add some detail. 

I was seeking clarity on how aesthetically pleasing products are presented as value and if possible correlated to price.  The nature of aesthetics is inherently subjective.   

I believe you find this phenomenon in a B2C world more.  B2B is usually preoccupied with proposing cost savings or revenue generation.  This is not the case here.  

Getting into the hospitality industry nuances was not the nature of my question but to help a little.  Hotel brands are a franchise operation focused on total revenue and brand popularity.  Fixed costs to hotel brands are not their problem because passed to hotel owners.  Hotel owners performance is measured on average daily room rate and average revenue per room.  Their metrics are variable costs.  Hence a fixed cost to a hotel owner is largely insignificant to them unless the item is really high cost or high revenue.

Not looking for anyone to validate how the hospitality industry works and all its nuances.  It would take a long time to go into this.

Slightly different way to ask question.  What is the value of beautiful product?  Already products is wanted.  Would like a justification of price instead of asking how much do you want to pay ;)

Mark Graham President & CEO at Caiman, Inc.

March 30th, 2016

Thanks Mike, 

First thing, sorry for the spacing issues and some funny words in my responses due to autocorrect on my mobile device. 

Couple things to clarify still though.

1) we do understand the target market  

2) the target market is buying or wants to buy, just not for the reasons we thought they would.

My question was about justifying the value to the customer for pricing given a customer has bought or will buy because it looks good.  Normally we could say something like the following which would be consistent with traditional B2B cost savings or revenue generation justifications for expenditures:  

"You will be able to re-coup your costs of our product because other products are typically 70% efficient where ours is 90% which will result in X power savings with the full cost covered after only Y months.  You can also get a carbon tax credit because of this and your "green" program will be well underway with meeting its goals this year." 

"Because you can incorporate your own custom images and texts you will be able able to promote the food and beverage selections in your restaurants within your rooms.  This will lead to higher sales revenue and other industries suggest ranges of 10-20% increases in food purchases.  After only X weeks the costs are covered."

"Studies have shown that the longer people stay around a particular area the more likely they will buy something.  By allowing charging at the bar or next to your hotel owned store your guests will be purchasing X more stuff.  Your guest scores go up and you are way ahead after just X days."

"You already have purchased Y product for X price because you know that on average there are 4 USB devices per person today and the millennials are looking for high tech.  You will not only save Z amount because of the cost savings over the Y product compared to ours you will also be able replace your business workstations more cheaply because our product allows you to connect lower cost but higher quality wired keyboards and mice to mobile devices too."

The question I was asking is this.  If we provide a customer with a price no matter what price.  How can we provide them with supporting details as to how this price is of good value to them.   Asking them, "why are you willing to pay such a price just because you like how our stuff looks" isn't really a good question is it?  They themselves may be willing to pay a certain price but only because they have an emotional justification.  I am looking for something more objective to reassure them that they received good value. 

What I would like to say is something like this:

"I agree Mr/Ms decision maker that appearance is the number one thing to consider and because it is well known that profit increases by U percent and your guests happiness scores increase by V when your guest are surrounded by pretty things due to the resulting pupil dilation that lasts on average W minutes.  As we know anything your guests see during this pupil dilation duration they will be X more likely to spend Y.  Because of this you are getting great value by only paying Z amount for our products we are selling you". 

If the above seems silly I can provide insights from working at ebay which is largely B2C.  There are measurable differences in buying behavior based on whether the background color of a product picture is light or dark.  There are measurable differences based on whether a person is in the product picture or not.  Think "pretty girl" standing beside a car for sale.  The color blue is the more universally favored color by both males and females.  The color white and black by far outsell all other colors.  I could go on and on. 

How to value beautiful products in the B2B world?

Not asking if a good looking product has more appeal than an ugly one.  I think we all agree that it helps when a product looks good. 

Not saying other hard money arguments don't apply to our products.  They most certainly do.

Not asking if our products look good.  Lets assume everyone thinks so.

The market has spoken, my products do have a perceived value for how they look regardless of the other reasons they are great.   How can I provide a quantifiable argument or justification for this perceived value in B2B?  The customer doesn't have the insight to connect the dots as to how they monetize beauty...I asked.

If there isn't any value/pricing framework for aesthetics in B2B, which I find unlikely given the universal appeal of beauty, I would suggest that someone should create a startup to figure it out.  Aesthetics are undeniably a fundamental influence in business.




Michael Brill Technology startup exec focused on AI-driven products

March 30th, 2016

Thanks for clarifying Mark... I think you answered your own question. You are already defining the functional benefits of your design and you want to quantify those benefits. It is harder than, say, power cost savings because you can't simply plug in your competitors' products and your own and see the difference.

There are a couple ways to look at this:

(1) If you're dead-set on quantifying physical appearance then identify the function benefits derived from your design (and stop talking about 'beauty' because that has no intrinsic value) and quantify those. That's hard because no amount of generic studies about color et al are going to translate into a believable pitch. You need customer case studies (Company A replaced Competitor B's doohickey with our doohickey and over 3 months saw the number of in-lobby reservations go up by X%). One real live customer beats a hundred research papers.

(2) Don't over-complicate things. You already have an economic advantage over competitors. No need to muddy your story by forcing a prospect to (sort of) understand pupil dilation. That will undermine your easy-to-understand economic benefits. Again, don't emphasize design as a feature of *your* product. Emphasize what it does for *their* environment. A mockup of your product in their environment may be far more compelling than busting out a research paper on the impact of bezel depth on the propensity to make impulse purchases. People (and you're selling to People, not Businesses) don't make highly-rational purchase decisions. They make decisions based on fear and greed. Show them your product in a Four Seasons - even if you have to give it away initially.

This is one of my favorite videos of all time which always remind me to focus on viewing the product through my customers' eyes, not my own:
https://vimeo.com/54469442



Mark Graham President & CEO at Caiman, Inc.

March 29th, 2016

Simply pursuing path for greatest acceptance in this industry. 

Compared to the cost/revenue justification I thought subjective appearance would be a harder sell but mostly boils down to how capex and opex priorities for parties involved and kpi tracking. 

I am fortunate to have a product that can compete well on many levels.  Just FYI, former facility of parsons new school of design in New York was the lead designer at Caiman.  New School was voted the top design school in USA last year and one of top 5 in the world.  I didn't need to go into how the Caiman tech blows things away also.  Strange how people replace their free ear buds but think their free cable and charger is okay to use. 

Kyle Bailey Managing Director at Frontburner Marketing, Speaker, Author

March 30th, 2016

Mark, 

No offense intended, but you're all over the place. Without understanding what problem you're solving, discussing value is impossible. Comparing anything to a 10M sculpture is pointless. That's one of the rarest purchases in business. 

Regardless of beauty, a problem must be solved to have a product. Once that is established, then aesthetic design comes into play on a sliding scale, and that scale is almost always determined by the customer. It's a much more subjective discussion, of course, and I think that's part of what has you stumped. 

I would suggest getting to MVP in form and function as fast as possible, and start selling it at the highest price you feel comfortable with, then measure, tweak, measure, tweak, etc...

Rob G

March 30th, 2016

Mark, it sounds like you are struggling to justify why your customers want to buy.  While it's good to know, it is also important to understand that most people buy on emotion and then look for a way to justify their decision logically.  So in the b2b world few will tell you that they want to buy because you product is 'pretty' or "aesthetically pleasing" so i wouldn't try to price it that way.  You are not going to sit down with a customer and and justify your price (and they won't either) by pitching: 'It's $5,000 because it has these graceful curves and this cool finish".  Just come up with a price, try it and iterate until you find the sweet spot. I wouldn't analysis it to death at this point. 

Ryan Rigterink Midwest Manager at Hematogenix Laboratory

March 29th, 2016

Based on the limited info, I would consider retooling your revenue model.  If your revenue generation proposition doesn't hit a threshold to matter to your target audience consider dropping your price and capturing that value over time in MRR.  You can still sell on the beauty if that gets traction.