Posts Tagged ‘price’

Marriott and RitzCarlton: When Ordinary Tarnishes Luxury

Wednesday, September 3rd, 2014

During my most recent stay at the RitzCarlton in Naples, Florida, it had become obvious what happens when an average brand—Marriott, in this case— takes over and dominates a luxury brand like RitzCarlton. This time, there were no slippers in my suite—offered only by request. Shoes left out for the overnight shoe-polishing service weren’t returned in an elegant, cloth bag, but in a tacky,.plastic one. And even the piano player, who always performed afternoons in the lobby, had disappeared. The piano remained, abandoned. The building also was in need of renovation in some places. Some guests pointed out that they now had to ask that the shampoo, shower gel etc. be refilled or replaced; in the past, these amenities were replenished daily, regardless of how little had been used.

Ordinary does not comport with luxury. Too often, average brands attempt to seek their salvation in lowering prices—which also doesn’t lead to growth in the mainstream, but that’s a story for another time. But luxury is not “common sense.” Luxury lives on excess, on rational extravagance. Luxury yields high revenues, but it also carries costs that would bring tears to the eyes of a comptroller. And exorbitant prices are paid for all of this. When I pay high prices and receive average service, I feel made to look foolish, and I turn elsewhere.

Still, RitzCarlton has a brand bonus. We often give these strong brands, with which we have had good experiences, the benefit of the doubt. Marriott would do well not to let RitzCarlton slide into mediocrity or, more positively stated, to give the brand the latitude it needs in order to develop. Marriott management can play the little game of lowering costs in their own house.

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

Ready, Set, Grow! This Week: The Carrot in Front of Your Nose

Monday, August 25th, 2014

Ready Set Grow
From time to time during a conversation about a possible project, especially with potential client companies of a certain size and complexity, we hear this: “Mr. Quelle, do you take into account at all in your fee that we can award additional projects if you and your colleagues do a good job?” Translated, that means: “Best if you don’t charge anything at all. That way, we’ll get something and you won’t. Oh, and by the way, we might be able to do more deals like this in the future.”

Usually, I don’t say anything and draw up a fair offer that pointedly ignores the implicit demand for low fees. The carrot of potential follow-on projects isn’t even a consideration until the first project pays off for all concerned.

Don’t let your clients dangle a carrot in front of your nose. You can’t hope for possible future business; such little hypothetical games don’t pay your bills. Also, make that unmistakably clear to your sales department. Cave in once, and the price never gets back to where it ought to be. Furthermore, have you ever once pushed a full grocery cart to the supermarket cashier and said something like this? “Just charge me half. I’ll be sure to come back more often.”

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved. © Sprinter: mezzotint_fotolia – Fotolia.com

Nespresso: Brand, Convenience, and the Effect on Price

Saturday, May 31st, 2014

It is widely known that Nestlé has created an impressive success story with Nespresso. Today, we’ll take a look at the impact of a strong brand—plus convenience—on price and (in-this-case-inevitable) profits.

OK, calculator at the ready.

  • After a pronounced rise in prices on the coffee market since the beginning of 2014, the cost per kilogram of coffee beans on the commodities market stands today (3/14/2014) at about $4.41.
  • Today (3/14/2014) on its home page, Tchibo is advertising a sale on its “fine-mild” blend: $10.38 per kilogram.
  • The “New York” coffee blend that we at Mandat purchase: about $42.00 per kilogram.

Now to Nespresso.

  • A single pod costs some where between 51 cents and 54 cents.
  • In each pod, there are about five grams of coffee. So, a kilogram would fill 200 pods.
  • According to Adam Riese, that comes to between $102 and $108 per kilogram. That’s a factor of ten compared to the Tchibo offer and still a factor of 2.5 against the “New York” blend.
  • In other words, for the price of a box of ten Nespresso pods, you can buy more than a kilogram of green coffee in South America.

Not bad.

We discuss with many of our clients the power of a brand on price and the advantages of convenience for price. The next time you find yourself in an executive meeting, bring up the subject of how you use the power of your brand and which convenience-advantages you can create for your customers—to the profit of both parties. You will encounter open doors to your customers. Whether this is also true of your team depends on their readiness to grow.

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.