Price, Context, and Payless Shoes

December 4, 2018

A new shoe boutique, Palessi, recently opened in Santa Monica in space formerly occupied by Armani. To celebrate the grand opening, Palessi threw a party for influencers.

As they drank champagne and snapped selfies for Instagram postings, they were asked their opinions of the various shoes and boots and their willingness to pay. Using descriptions like “elegant” and “sophisticated,” this group lauded the materials, style, and craftsmanship of the store’s wares. They said they’d pay a variety of prices, all in the hundreds of dollars. The top offer was $640, and Palessi sold about $3,000 worth of products in the first few hours of the party.

The big reveal at the party, as it turns out, was that this store was a pop-up stocked by Payless ShoeSource. All of what “Palessi” offered at the party was available at Payless Shoes for prices ranging from $19.99 to $39.99:



We may chuckle on how this group got bamboozled, but we are all subject to the same principle:  perception of quality and willingness to pay is heavily influenced by context, placement, or geography. We’re all subject to it.

We pay different prices for bottled water, for example, in the grocery store, the convenience store, a sporting event, or the movie theater. We not only pay different prices, but we expect those prices to be different.

Each of us, however, values the context of bottled water differently. I may rebel about the “exorbitant” price of the bottled water on Friday night at the movie theater, but the very next day, as I’m baking in the sun at the ballgame, I’m happy to pay that same price or more for that very same bottle.

The “influencers” at Palessi were clearly willing to pay for location (swanky store in Santa Monica), exclusivity (an invitation-only grand opening party), association (I’m part of the “in crowd”), acceptance (a purchase here validates my “influencer” status), and brand perception (Palessi? Must be Italian!). Even among this group, however, different individuals were willing to pay different prices, based on their own internal calculus of the sum of all these factors.

This principle is not just confined to retail. In the B2B and professional services space, think about legal services. Think about a sloppily dressed lawyer who works out of a storefront. You can peer in and see him working at an old metal desk with an ancient computer. Then consider the sharply dressed attorney in a downtown high-rise, sitting behind a large wooden desk, Apple computer at the ready, in a well-appointed office. What’s your perception of the quality of the legal advice you’ll receive, and the price you’re willing to pay for that counsel?

If you are pricing your products or services without a keen understanding of buyer context, your price is wrong. You're almost certainly leaving profit on the table.

(Photo credit: Payless Shoes)


About me:  I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Click here to learn more or call me at 404-287-2627.

1 Comment

  1. […] to context as well as the geography they find themselves in. This lesson is one takeaway from the undercover “Palessi” shoe store promotion conducted by Payless Shoes. Customer expect to pay more for a soda at the ballpark or the movie theater even though it’s the […]

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