This past weekend my wife and I decided to go to dinner someplace where we could watch March Madness on TV. We picked a restaurant with plenty of TVs easily visible from most any table, a well-stocked bar, and a typically casual menu. There were salads, burgers, chicken, pork, steaks and seafood available. After each of us ordered baby back ribs, I observed what a great marketing and pricing success story ribs and chicken wings have been. Products that were essentially unwanted years ago are now in high demand and command premium prices.
A slab of baby backs was $23 at the restaurant, which is more than the price of a pork tenderloin, a ribeye steak or a sirloin steak. Based on customer demand, I am certain that price makes sense, however I also think the quality and quantity of edible meat in any of the 3 alternatives is higher than in the ribs. Similarly, I also observed that a dozen chicken wings cost about the same as a dinner with either 2 chicken breasts or a ½ a chicken. Again, I believe the quality and quantity of chicken meat is higher in the alternatives than it is in the wings. So why do I (and others) often order ribs or wings instead of better cuts? Because years ago, meat producers found a customer segment that turned the lesser cuts into something more desirable with a different cooking method, then communicated (marketed) the virtues of these lesser products to the rest of the population. We liked it, demand increased, and prices rose.
When discussing this with my wife, she wondered if the cooking process for ribs and wings is more labor-intensive, and the extra labor resulted in the higher prices. To test that, I checked out the prices at a local meat and seafood store. Baby back ribs had a higher price per pound than any other pork products, yet ribs certainly contain less meat per pound than pork chops and whole pork loins. With beef, short ribs were more expensive per pound than round steak, sirloin steak and beef briskets, but were less expensive than New York strip steaks, ribeyes, and filet mignons. After accounting for the weight of the bones, short ribs might be more expensive than all of them. Chicken wings were slightly less expensive than boneless chicken breasts, but were probably more expensive after adjusting for the bones. (I did not actually weigh them).
Whether you like ribs and wings or not, you might be wondering, “What’s the point?” The point is customers are not all the same, and paying attention to what different customers do with your products and why can often lead to new markets and better pricing for your products. As another example, consider beer. Years ago, Corona was considered a lower quality beer in Mexico and Red Stripe was a cheap beer in Jamaica. However visiting Americans seemed to like the beers, and within America imported beers could be sold at premium prices. Red Stripe capitalized on the popularity of Reggae music in the US to significantly increase sales at much higher prices. Corona was extensively marketed here with a carefree image of summertime, sun and the beach. It is now the largest selling imported beer in the U.S.
You may not be selling food or beer, but you can pay attention to who buys your products and how they use them. Find out if there are some customers who do certain things that make your products more usable or more effective. If so, can those actions be brought to other customers or potential customers? If there are certain characteristics of your product that appeal more to one group than another, consider creating multiple versions of the products with multiple price points. None of this requires rocket science, but it does require keeping a broad perspective about customer segments and exploring how to turn out-of-favor products into high-demand. Perhaps you can do that over wings and a Corona this summer.