Two short stories illuminate powerful lessons in pricing and value for marketers and the brands they serve.
In the movie the Local Hero a Texan oil firm attempts to buy out a small Scottish town and turn it into an oil refinery.
From the earliest concept, writer and director Bill Forsyth had only one man in mind to play Felix Happer, the head of the oil company, who eventually falls in love with the town and saves it from destruction.
He wanted Burt Lancaster.
This presented the producer, David Puttnam, with a problem. Lancaster loved the script, but wanted $2M to play the role. That was a third of the film’s entire budget, and far more than the producers could afford.
So negotiations began. For six months, Puttnam tried every tactic he knew to get the price down. Each time, Lancaster reconfirmed his desire to make the film and pointed to the only stumbling block: his $2M fee. With only days left before filming began, the Local Hero production team admitted defeat and agreed to the star’s demands. At the film’s silver anniversary celebrations in 2008, Puttnam recalled Lancaster’s recalcitrance: ‘The bugger would never, ever, ever break his price. We ended up paying him the price he quoted at the very first meeting.’
It’s a story worth retelling to marketers when focused on the subject of pricing to illustrate one of the topic’s most important lessons: you must hold the line. If your quality is good and your targeting and positioning are right, have confidence in the price you have set and do not consider dropping it. Remember, something cannot be good and cheap. Don’t be afraid of a premium price or maintaining it in the face of market pressure.
Too many marketers contradict their brand’s positioning either by launching at too low a price or dropping that price too easily at the first sign of trouble.
The consulting firm McKinsey has long observed that between 80% and 90% of incorrect pricing decisions are made by managers who charge too little for their products. That’s a stunning fact and comes with an even more astonishing implication: these organizations could have enjoyed better margins and unit sales – as well as stronger brand equity – if they had only followed the wisdom of the Burt Lancaster School of Pricing.
The Champagne brands, for example will destroy millions of liters of bubbly in the face of a dismal sales year, rather than discounting price, damaging their brands and destroying their long-term prospects.
It’s certainly the approach that Lancaster would have endorsed. He was a man who knew his value and ensured that his customers knew it too. A few weeks after he signed on with Local Hero, CBS called the film’s producers to confirm that, because of Lancaster’s presence in the key role, they would be paying $2.2M for the rights to show it.
Lancaster’s ‘outrageous’ fee had actually made money for the picture. Puttnam recalls it as a ‘powerful lesson’ on pricing and value, and it’s one from which many marketers could also benefit.
Pricing, Value And Outcomes
Burt Lancaster’s example of ironclad price integrity brings us to another important lesson in pricing and value especially for those of us involved with the development of strategy and creative.
In a story that has been told many times before, Picasso illustrates how what is valued should not be measured by effort or time but by outcomes. In some fashion we hope it will help you sell in the value of your ideas now and in the future.
Picasso is sketching at a park. A woman walks by, recognizes him, and begs for her portrait. Somehow, he agrees. A few minutes later, he hands her the sketch. She is elated, excited about how wonderfully it captures the very essence of her character, what beautiful work it is, and asks how much she owes him. “5000 francs, madam,” says Picasso. The woman is incredulous, outraged, and asks how that’s even possible given it only took him 5 minutes. Picasso looks up and, without missing a beat, says: “No, madam, it took me my whole life!”
This is a story about mastery. It’s also a story about outcomes and how they should command our focus and drive the decisions we make about pricing and value. More directly, leading creatives, strategists and brands today should focus on optimal outcomes, rather than how much time is involved in producing them.
Outcomes are the only thing that matters now.
Co-authored with Mark Ritson.
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