Written by Kevin Jones, Principal – Ignite Selling
In July 2011, two bottles of liquid treasure, in this case French champagne, crossed half the globe, from The Åland Islands off the coast of Finland to a Russian restaurant in Singapore, Buyan Haute Cuisine and Caviar Bar. The restaurant paid $78,400 US in an online auction for these two special bottles. The restaurant planned to display the two bottles in its wine museum, which already houses other rare wines . Why were they willing to spend so much? Well, therein lies a tale, which explains why value truly is in the eye of the beholder.
“Come Quickly, I am Drinking the Stars”
Champagne, which technically refers only to sparkling wine produced in the Champagne region of France, has been a favorite of the rich and upwardly mobile for centuries (the first was produced by Benedictine monks in the 16th century, for what it’s worth). Dom Perignon, who did not invent Champagne, made so many significant contributions to the craft that wine named for him is some of the most expensive sold today. We cannot confirm, but we have it on good authority, that it is worth every penny. The wine that made its way from the Åland Islands to Singapore, however, was not Dom Perignon. So, what explains the price tag?
In the summer of 2010, divers from Sweden and Åland discovered a previously unexplored shipwreck off the Åland archipelago, in the Baltic Sea. There was nothing particularly remarkable about the ship itself: a two-masted schooner lying on its wooden hull in 200 feet of near-freezing water. The divers made some interesting archeological finds: plates, cookware, spices, coffee beans, and carpets. But nothing compared to the real treasure on the ship: 172 bottles of vintage champagne.
The name of this sunken treasure ship is still unknown, as is her destination, although speculation abounds that she was bound for the royal court of the last Russian Tsar, Nicholas II, in St Petersburg. According to experts, this champagne’s vintage is from the first half of the 1800s, making it the oldest champagne in the world. The bottles did not have labels, but markings burned into the corks indicated that they were from the champagne houses of Veuve Clicquot, Juglar, and Heidsieck. Would you like to buy a bottle? Maybe two?
Although we’re sure that many people believe it would be very cool to own such a unique piece of history, few of us personally know anyone who could rationalize such an extravagant expenditure (not even to celebrate a particularly big deal). On the other hand, there are many people with the means and the appetite to purchase this liquid treasure. Why? What rationale would they give?
We can only guess. What matters is this significant point: every decision people make to buy something – in fact, every decision at all – has a rationale to support it. Sometimes this is a well thought-out and rigorously calculated decision tree. Other times, it is more ad hoc. But a rationale is there. It could be meeting fundamental needs, such as food, clothing, or shelter. Or it might be projecting a certain image or status, such as a luxury automobile or a particular brand of clothing. Or the rationale behind investing in a timeless timepiece. Even when we have a vigorously defensible rationale underlying a purchase, we might still find ourselves asking if it was worth it.
Many of you reading this probably have at least one good business suit. That suit could have cost you anywhere from $100 to $3,000 – or maybe more. How much would you pay? How much do you value the quality of the material? How important is the proper, custom fit? Is the label on the inside of the jacket important to you? How do you measure value?
What is Value?
A widely used measurement of Value is depicted in the definition below:
Value = Benefits – Costs
In general, people will say “yes” to a purchase if the sum (that is, Value) of the Benefits and Costs is a positive number (that is, if Benefits are greater than Costs). This measurement of Value can be quantified, if you work the equation like an arithmetic problem. In fact, if you are selling a premium-priced product, you simply must quantify it.
Consider our sunken champagne for an example. What is the Cost of the champagne? The Singapore restaurant paid $75,000 for those two vintage bottles. Is that the cost? Well, partly it is. But true cost comprises many elements in addition to the price, which is neat and easily measureable. For instance, the restaurant probably paid expert advisors to help them understand what they were getting into and to appraise the champagne. Then there is the soft cost of time: time spent researching, time spent in the auction, etc. Once purchased, transportation costs must be considered. Once the champagne reaches Buyan Haute Cuisine and Caviar Bar, it is likely their insurance and security costs would have increased. We do not pretend to be experts here, but there are probably other soft drivers of cost which must be added to the hard driver of the price. But for simplicity’s sake in this example, let’s just consider price to be equal to Cost. If Cost is $75,000, Benefits must be greater than $75,000 for there to be positive Value in this equation. If you are trying to persuade the owners of Buyan to take a run at this champagne, one of your tasks in selling it is to find Benefits that are greater than $75,000.
Every sales person has something to sell, be it a product or a service. And those products and services have price tags. Some factors in that decision making are actual price tag costs, but there are other non-price factors that go into the decision as well. Identifying what the buyer values is always an interesting process. Value is in the eye of the beholder and in business there are many factors that go into that decision. Our job as sales people is to uncover what the buyer values. By helping buyers to quantify value we are often in a position to influence the mindset.