December 19, 2017
Could seatbelts really be value priced?
In a recent message (subject: “How do you value price if the client’s financial outcome is out of your control?”), I posed the question “What is a seatbelt worth?” in order to contrast the difference between the immediate benefit of wearing a seatbelt (i.e., it makes me feel safer), with the distant and uncertain hypothetical future benefit (i.e., it might save my life if I ever happen to get in a car accident).
To extend my line of thinking to the logical (if absurd) conclusion, I talked about what sort of discussion I would have with a buyer if I were a seatbelt manufacturer who wanted to value price my product.
While I suppose it would be technically possible to value price a seatbelt, the dynamics of the marketplace in which seatbelts are sold would make it comically difficult.
Here’s why:
- Value pricing works best when the offering is strongly differentiated. A standard seatbelt is essentially a commodity (i.e., it’s not strongly differentiated from one brand to the next).
- Value pricing requires a conversation between buyer and seller, which is prohibitively resource intensive for a relatively inexpensive mass market product like a standard seatbelt. There is no venue through which a seatbelt manufacturer could have a sales conversation with the end user. A seatbelt is part of a car, and cars are sold by a third party.
Having typed all that up, it occurs to me that there are fringe markets where value pricing a seatbelt would be a lot more feasible, like professional auto racing or vintage auto restoration. But these are exceptions that prove the rule, which is:
Selling an undifferentiated commodity through a third party makes value pricing effectively impossible.
Yours,
—J