The dinner plate model to understand added value in pricing.
Updated: Feb 5, 2020
Do not think about what something COSTS - think about what it is WORTH.
If you are pricing and selling items using published prices provided by either the vendors or websites, you are not charging for the true VALUE of the items.
The best way I've come up with to talk about what I mean is to compare Interior Designers way of working to how Chefs work.
Chefs purchase food, prepare it expertly, plate it and serve it in an environment designed by them. A good chef has carefully composed the food on the plate so all the flavors mix to create something better than any one ingredient alone. The chef also controls the experience of receiving the food and the environment in which to enjoy it. We all know we could go to the store to purchase a steak for less money, but we are buying so much more than just a steak when we go to a restaurant - we are purchasing the expertise, the composition, the environment, the STATUS of dining at that particular restaurant. Your client would not think to mention to the chef at Canlis or Le Bernardin that they can buy that same steak down the road at the grocery store for less!
You would also not expect two different chefs in different restaurants to charge the same price for a steak dinner, even if the steak is an identical tenderloin from the same supplier. Each chef ADDS VALUE to the steak in their own way. The price of the steak is inclusive of the perceived value the chef adds to the steak - the customers agree that the value added to the steak makes it worth more than the same steak in the grocery store or down the street at the Sizzler.
So why do interior designers lock the price they sell items for to the price the goods can be acquired elsewhere? That Theodore Alexander piece might be for sale on Perigold - and your client can shop around for it in many locations, but when YOU put it into the right context, in the right space, with the right light and accessories - I argue that the piece is actually worth MORE than the price listed elsewhere. You add to the value of the items you sell simply because you have selected them! So why not charge for that value?
If you present an itemized invoice to your client with the price of each individual item, matched to the MSRP or the lowest price found online, you are presenting a shopping list, not providing the elements of the design your client has paid for.
I hear so many horror stories of interior designers getting calls from their clients that they have found an item on their invoice online for a lower price. The designer feels obligated to match that price to keep the sale, and so goes the profit in providing the goods to install the design the client has paid us to do.
Another angle on this same topic; when you deprive your client of the opportunity to pay for value, they no longer experience the value. We indicate value in this culture with dollars. If I can eat at Canlis for the same price as down the street at Outback, what is special about Canlis? Eating at Canlis tells you something about yourself - it is an exclusive experience and not everyone can do it often. It's special! Paying more for the dinner there is part of how the client agrees that it's special and receives the full value of the experience.
If you, as a designer, are selling individual items at prices that are competitive in the online marketplace - you are selling the wrong thing. Canlis doesn't sell groceries, and you shouldn't either.
How do you define value? How do you talk about the value you bring to a project? How can you un-couple VALUE and PRICE so you and your clients are more focused on the VALUE, which is the permanent piece - price is forgotten, value is forever.