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Pricer’s Points: The Burt Lancaster School of Pricing | Mark Ritson

So negotiations began. For six months, Puttnam tried every tactic he knew to reduce the $2 million price tag. Each time, Lancaster reconfirmed his desire to make the film and pointed to the only stumbling block: his $2 million fee. With only days left before filming began, the Local Hero production team admitted defeat and agreed to the star’s demands. At the film’s silver anniversary celebrations many years later, Puttnam recalled Lancaster’s recalcitrance: ‘The bugger would never, ever, ever break his price. We ended up paying him the price he quoted at the very first meeting.’

It’s a story I retell to my MBA students when we get to the subject of pricing to illustrate one of the topic’s most important marketing lessons: you must hold the line on price. If your quality is good and your targeting and positioning are right, have confidence in the price you have set and do not consider dropping it. Sure, customers will ask for a discount – why wouldn’t they? And certainly a higher price will result in some lost sales. But sales are not the lifeblood of business, profit is. And price premium is – quite literally – the most important level you can pull to driver your companies profits and long term success.

It’s a lesson that has been drummed into me over the years by many of the senior executives of the top luxury brands that I have worked for. Something cannot be good and cheap. Don’t be afraid of a premium price or maintaining it in the face of market pressure.

Too many marketers contradict their brand’s positioning either by launching at too low a price or dropping that price too easily at the first sign of push-back. The consulting firm McKinsey once observed that between 80% and 90% of incorrect pricing decisions are made by managers who charge too little for their products. That’s a stunning fact and comes with an even more astonishing implication: these organisations could have enjoyed better margins and probably better long term unit sales – as well as stronger brand equity – if they had only followed the Burt Lancaster School of Pricing.

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The Burt Lancaster School of Pricing | LinkedIn.

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