Don't let the old man in

How would you decide if you did not know?

A story is told about how a popular country music song was created. Toby Keith and Clint Eastwood were playing golf one day. Keith asked Eastwood how he remained so youthful and active. The response by Eastwood was that he, “don’t let the old man in”.

Keith liked the response and went home to write a hit song by the same title of this article. The song is about one’s outlook on life and remembering to do what are the special items in your life. The part of the song that catches our attention is, “how old would you be if you didn’t know the day you were born?”.

While the question definitely ties to the rest of the lyrics, we know there are several areas in business where it could also apply. Today we are going to look at the question with consideration to the prices we charge our customers for both products and services.

What would you charge for something if you did not know the cost?

With many things we seem to establish a timeline based on the pandemic which began in the US in March 2020. With some 60 days left in 2022, the inflation rate since the start of the pandemic has been 11.8% according to one method. As an example, for an item purchased, it would have been $10 in March 2020 and $11.80 in October 2022. There is another method of calculating the inflation rate. If we use the second calculation method, the $10 purchase would now be $14.68.

Inflation is definitely a justified concern with products we purchase, services we utilize and definitely with payroll in our business. Most likely we have all found ourselves in conversations that express concern about the increase in the cost of some product or service that we have bought in the past and have recently purchased again.

Not that inflation will continue forever, but everyone has a certain degree of “numbness” in experiencing a price increase. Hence, the aspect of price increases can definitely work in our favor when it comes to establishing our prices for products and services.

Having taught a class on the strategy of pricing at the PRI show, we repeat a question from that class, “What would you charge for something if you did not know the cost?”. We repeat the adapted song line because it is the basis for the class.

When you are selling something, the last thing to take into consideration is the cost. You base the selling price on your determining what you think a customer will pay for the item.

While there were many in attendance we had an interesting experience with an owner.

“I see you are going to teach your class on how to price this afternoon. I have been to it before”, was the comment from the first person walking in the room.

And while I explained this would be the first time I had taught the class at PRI, this person explained they owned multiple businesses and had heard the class at a trade show for one of their other businesses many years ago.

He shared this story; “After the show I went home and talked with my manager about what you had said. I pulled a product off the shelf and told him how much we could increase the price by using your technique.  As fate would have it, that same afternoon a customer came into our show and asked for help in selecting a product.
The oddity was that the product selected was the same one that I used as an example with my manager. The customer asked the price and I took a chance by telling him a price according to your methodology. The customer responded to say it was a fair price and he would purchase the item.

I took this as a sign that we should implement what you taught. That was in 2007. Because of the great recession of 2008, our sales dropped by 15% yet we made more profit. Our sales dropped another 15% in 2009 and we made even more profit. If it had not been for what you taught, we would have closed the doors permanently”.

That’s a firsthand testimonial that corelates with the question we have asked twice; “What would you charge for something if you did not know the cost?”

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This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 128, Dardanelle, AR. 72834. Phone 727-823-7205. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.