W-A-Y West of Jewfish Creek
Dear Friend & Subscriber,
My friend Joe Sugarman came down for the Super
Bowl and I invited him and his pretty daughter, Jill, to take
a little cruise with me on the trusty Original Sea Hunt.
So, there we were, tooling around in Port
Everglades when we come upon a huge, bloated and tasteless
vessel called the Trump Princess. What I do is, I steer over
to just a few yards from this vulgar monstrosity and I yell
out to a crew member, "Hey!
Tell Donald that Gary Halbert and Joe Sugarman are here!"
The crew member said he would... right after
Mr. Trump finished his nap.
The next day, I'm cruising with another old
friend, Sam Kendes, who looks something like Walter Matthau
with a world-class hangover. And, once again, I approach the
Trump Princess and this time I yell out, "Hey!
Tell Donald I can't make the mortgage payment this month and
ask him if he's got enough money to make it by himself for the
next 30 days!"
No response. This crew member didn't seem to
have much of a sense of humor so I tootled on about my
Anyway, all this got me to reflect a bit on
the Trump Princess and I go to idly speculating on what such a
monster tub would cost. (I know, I know. If you have to ask,
you can't afford it.) Which also led me to realize that one of
the most important areas for me to cover in this newsletter is
the matter of what is the most profitable price for you to
charge for your goods and services.
Let me begin to focus in on this crucial
subject by making an important observation which is...
Price Is Relative!
Listen: Fort Lauderdale offers (if you can
afford it), the highest quality of living to be found anywhere
in the U.S. and, probably, the world. It has 6-1/2 miles of
uninteruppted beach, 170+ miles of inland waterways, (much
more than Venice, Italy), a gorgeous subtropical climate and,
for sickos who like that sort of thing, lots and lots of sweet
sexy maidens running around in string bikinis.
It also has the Jungle Queen.
The Jungle Queen (actually, there are several
of them now) is a large passenger touring boat that leaves
almost every night of the year for a fascinating and
informative trip up the New River which slices East/West
through the heart of this wonderful city. During the trip, the
tour guide points out the local attractions and he makes a
special deal out of showing off those yachts and homes that
will get an "ooh"
and an "ahh"
from his audience.
Well, he certainly did a good job and he got a
lot of "oohs"
from me and Paulette... but not for the reasons he
would have guessed. You see, when he would point out a
particularly magnificent waterfront house and then say, "And
guess what, folks, if you're in the market, this one just
happens to be for sale and you can pick it up for only
"X" dollars!" and the audience would marvel
because it was so expensive and Paulette and I would marvel
because, to us, it...
Seemed So Cheap!
Hold on! I'm not trying to say we've got
monster bucks. No. What I'm saying is that we are from L.A.
and, in the City of Angels, it costs more to buy an average
home in an average neighborhood than it does to buy a
waterfront mansion in this neck of the woods!
Price Is Relative!
A few days after our Jungle Queen trip, I'm
taking a course in powerboat handling from the Bahia Mar
Yachting School (I did great) and I get to talking to one of
my fellow students named Ed who is from some dreadful state
like New Jersey or somewhere. Ed is retired now but,
previously, he traveled all over the world building power
plants for General Electric. So, we get to shucking and jiving
about the cost of living in various geographic locations and
he tells me how outrageous it is in Tokyo, Japan. It seems
that, over there, you have to have your car inspected every
three years at a cost of $2,500. Also, he says, it'll set you
back about $1,000,000 to join a country club. Fruit, he says,
is not sold by the bunch, but rather by individually wrapped
pieces and a single banana, for example, will run you about
You know, here in Lauderdale, whenever we are
presented with a bill for something, Paulette and I have a
tendency (unless the bill has something to do with a boat) to
giggle. That's because, to us, the tab always seems so low.
Price Is Relative!
And, did you ever notice how Japanese tourists
seem to giggle constantly... even
in Los Angeles? Why? It's very simple. You see, to them,
even L.A. prices are a joke.
Price Is Relative!
I believe all of us have psychological price
points of resistance that are embedded in our psyches since
childhood. I, for instance, know what a hamburger is supposed
to cost. It's supposed to cost 25¢ and, if you want a slice
of cheese on it, it is supposed to cost 35¢. And a Pepsi is
supposed to cost 10¢.
And don't you
try to tell me different!
You see, I know all this because I bought
hundreds of hamburgers, cheese-burgers, and Pepsis from Bell's
Diner on Wooster Road in Barberton, Ohio when I was in my
teens and therefore... I know what this stuff is
supposed to cost.
A relevant side trip: Years ago, I and my
family lived for several weeks at The Plaza Hotel (one of my
favorites along with the Pierre) in Manhattan. Never mind that
the rooms were costing me hundreds. Never mind that the air
fares cost me thousands. Never mind that cocktails in the Oak
Bar would set you back a small fortune. No. All I could focus
on was that those robbers were charging me $5.50*
for a room service hamburger. (*FOOTNOTE:
I had Paulette call the Plaza and check and the current price
for a room service hamburger is $19.00!)
Can you deal with that?
I want you to imagine something. I want you to
imagine you are on the ground floor of a tall, narrow building
with one room per floor. You've got a ten foot pole in your
hands and you are pushing the sharpened, pointy end of that
pole against the ceiling...
Which Is Made Of Hard Rubber!
You push and push. You sweat and strain and
finally you break through to the second floor. And then, you
run upstairs and you pull your pole through the hole you've
made and it is almost effortless to keep your pole going up
and up until you come to the hard rubber ceiling of the second
floor. And then, once again, you meet a lot of resistance.
But, once again, when you do break through, it's easy going
until you come to the ceiling of the third floor.
And so on.
And so it is with points of price
resistance. What I'm trying to illuminate here is that, once
you break through a certain level of price resistance, you may
as well go all the way to the next resistance point. For
example, a common price point in mail order ads is $19.95.
Now, most of my experience tells me that, if you are going
above $19.95, you may as well go all the way to $39.95. And,
after $39.95, you may as well go all the way to $69.95.
A curious story: Years ago, I
was selling an El Cheapo impulse item and I tested
$1.00, $2.00, and $3.00 and the $3.00 price won hands-down.
But, when I tried to go above the $3.00 level -- even to just
$3.10 -- my sales went right into the toilet!
So, how much should you charge for what
you are selling? That's the real question, isn't it?
Hang on. I'll cover that in just a bit. But first, here are a
few ideas I have about price points:
you are going after "just slightly
qualified" leads and you want to eliminate
freeloaders, ask the folks to send you $1.00 or $2.00.
But, at this
range, do not ask
for a fractional
mount like 97¢.
By the way, Blade
Thomas (an excellent
copywriter) and I once worked on an ad headlined
"The Amazing Blackjack Secret of a Las Vegas
Mystery Man" and we charged $2.00 for postage and
handling for our written material and...
Those $2 Payments Covered The Entire Cost
Of A Full-Page Newspaper Ad!
is probably the most viable price when you are trying
to make a profit
with a low cost impulse item.
If you are going
above $3.00, I suggest you go all the way to $7.95
plus $1.00 postage and handling.
The next stop (if
I were doing the testing) would be $9.95 plus $2.00
postage and handling.
Next: $14.95 plus
$2.00 postage and handling.
Next: $19.95 plus
$3.00 postage and handling.
Next: $39.95 plus
$3.00 postage and handling. That's right. My
experience leads me to believe that, after $19.95...
There Are No More Hard Rubber Ceilings
Until You Hit $39.95!
Next: $69.95 plus $3.00 postage and handling.
Next: $97.50 plus $5.00 postage and handling.
Next: $134.50 and no
postage and handling.
Next: $195.00 and no
postage and handling.
NOTE: These prices are not etched in stone. No. They
are merely intelligent guidelines.
Now, here's another tidbit of interest: You notice I've
emphasized that you should go from $19.95 straight to $39.95 with no stop in
between, right? OK, but listen: That's only for when you are selling direct
from the ad or letter. If your ad asks people to telephone and, at your
end, you have people reading a short, low-pressure,
"path-of-least-resistance" sales pitch, I suggest you ask for $24.50
which, for some strange reason, seems to be the price that proves out the most
profitable in these situations.
Also, you can probably get away with having your phone person
tack on another $3.50 for shipping, etc.
Another thought: If you are price testing on a new
promotion, test at the lowest price at which you could reasonably hope to make
a profit. Also, test this lowest price to a group of your very hottest
Why? Simply because most new projects fail and, if they are
going to do so...
You Want To Fail As Fast As Possible!
Listen up: Time is the irretrievable element. What you
don't want is to end up with bad numbers and be wondering, "Gee, maybe it would've worked if I only hadn't asked for so much
money. Maybe I should re-test at a lower price."
No good. Look, Buckwheat, maybe this deal wouldn't fly even if
you gave the item away and, if so...
You Want To Find Out
Your Very First Shot Out Of The Box!
Now, let's go to the other end of the scale. What if you're
tying to sell something much more expensive like a seminar? Or a yacht?
Or a Rolls Royce? Or your consulting services?
If so, my first piece of advice is...
Sell It For What It's Worth!
Don't ask for more. Even
if some people will pay it. Why? Because it's not ethical, damn it, and you'll
be cheating someone and that sucks.
Don't ask for less. If you
do, you'll be cheating (and demeaning) yourself and that sucks also.
Come closer. Listen: I don't know for sure, but maybe I'm the
most in-demand copywriter in the country. Believe it or not, I really
do turn down 9 out of 10 prospective clients (read "Can You Afford to
Hire the Amazing Prince of Print?" to understand why) and, because of
this, I can, within reason, charge pretty much whatever I wish. However, in
many cases, people are so eager to work with me that they are willing to pay
far more than my standard fee.
But I Don't Take It!
And, why not? Simply because it isn't right. Look,
whenever I go into a deal I do not go into it as a negotiator. No. I go
into it as a detective. And what I'm trying to "detect" is
what deal is fairest and most likely to work for everyone concerned.
I don't want more than my share.
I don't want less than my share.
You know, there are many people in the world of business who
get their jollies out of besting someone else in a deal. They gloat when they
find a printer down on his luck and they can squeeze him to sell them
envelopes at less than cost. They hammer all their suppliers down to the last
cent. If they're in direct mail, they want everybody's profit... even
as far back as the guy who grows the tress that are used to make the paper the
sales letters are printed on.
How sad. These guys are often wealthy and they think they are
a success. But they're not. They're just lonely, lop-sided losers. Here's a
composite picture of a typical American tragedy:
multi-millionaire and he owns a chain of 73 retail widget outlets.
He's 60 pounds overweight and his cholesterol level is sky high. He
hasn't had a meaningful talk with his kids in five years and they're
all taking drugs and think of him as a pathetic cartoon figure. He and
his wife have separate bedrooms and his love life is nothing but a
And so on.
And, can you guess what is the #1 priority of this miserable
wretch? That's easy. What he's most concerned with is...
Opening His 74th Retail Widget Outlet!
What's that? You say you didn't subscribe to this letter so I
could have a soapbox upon which to spew out my vapid moralizations? You say
you want something really useful and immediately
profitable on the subject of pricing?
Alright, what if I reveal unto you why the prices you
are currently charging (no matter how many tests you've made) are probably way
off the mark as far as maximum profitability is concerned? OK, boss? So, now
The Most Profitable Price
You Can Charge Varies Dramatically
Depending On How "Sold" Your Prospects Are!!!
Listen: About 70% of all adult Americans (including me) are
porkers. Now, suppose someone offers one of us porkers a safe diet pill that
we are 100% certain will let us continue
to pig out to our heart's content and still lose weight like crazy? What would
we pay for such a pill... if we were 100% sold
that it would cure our weight problem forever?
Thousands. Thousands and thousands and thousands. Maybe even
100 or 200 thousand. And more!
Truly, it is so. But, since we are almost never "100%
sold", we elect to take a "$19.95 chance" or a "$39.95
chance" or a "$69.95 chance" or whatever. Hey, let some
lukewarm dork of a copywriter write a package for your investment newsletter
and you may find that your best price (since you're only pulling in the
hottest of the hot prospects) is very low... like maybe $19.95.
But then, if you're smart enough to pay the tab to get a real
"killer" copywriter like Gary Bencivenga to do a direct mail package
for you, you may find your most profitable price is much, much higher.
A Lukewarm Sales Job
Forces You To Charge
Often, a new client tells me that he "knows", from
all his extensive split run tests, that his most profitable price is this or
Oh yeah? Well I never accept that at face value because
I'm always thinking...
Know Squat, Pilgrim --
Not Until Sir Gary Has Taken
A Shot At This Deal!"
Now, here's a very important insight I got from my friend Eric
Weinstien who, for my money, is the best damn list broker in the country:
The Hottest (Most Responsive) Mailing Lists
Are Made Up Of Names Of People Who Have
Responded To The Weakest Of Offers!
Think about it. Only the hungriest fish will bite the
OK, let's suppose you've got a strong sales presentation and
you've tested all kinds of prices and you've come up with the one that works
best for you. How do we improve on this? Trust me, you're going to love this
insight -- which I'll begin to explain by reminding you that...
There Is No Law That Says
We Can't Charge A Different Price
To Different Groups Of People
Who Live In Different Geographic Locations
Or Who Have Different Income Levels
Or Perhaps A Different "Passion Level"
For What We Are Selling!!!
Hoo, haa Steverino! We're cooking now, ain't we?
says we have to charge the people in Mississippi the same as we charge
the people in Manhattan?
Who says we can't do a different price test in every different
Who says the price we charge in the National Enquirer has to be the
same as what we charge in the New York Times?
Who says we have to charge the same price to M.D.'s that we charge
to ditch diggers?
Hey, maybe we should start "customizing" our
presentations, our product, our product's name
and packaging and even our price...
According To Whom We Are Pitching!
"The Price is
I've recently come across a book I consider
"must" reading. It's called "The Clustering
of America" and it's written by Michael J. Weiss and
published by Harper & Row.
||Don't you dare
miss next month's letter. It's one of the most
important I'll ever write.
A final thought: BEWARE
THE MAN WHO KNOWS THE PRICE OF EVERYTHING AND THE VALUE
Copyright © 2003 Gary C. Halbert. All Rights