Strategy The Business of Healthcare

An $800 Sneaker and Its Lessons for Your Business

August 19, 2014

An $800 sneaker?

How can its lessons be applied in your practice or business?

The Wall Street Journal recently reported on the Buscemi brand of sneakers, created to be the Birken Bag’s shoe world equivalent: very hard to get and very expensive.

Buscemi is taking advantage of supply and demand.

They’re also escaping commodity status. There are thousands of sneakers on the market, with an average selling price of $65. They’ve done so by artificially restricting supply, and placing themselves in a price category where there is little to no price sensitivity: at the astronomic end of the scale.

These people don’t see themselves as selling a commodity. They’ve made a mindset shift.

There is also the issue of price sending a message of value. We often think that price follows value, but price itself can lead value. People who buy an $800 shoe perceive that they are getting value, whether it is in the quality of the leather or in the snob value of having the shoes.

And, last, it’s evidence of the Pareto principle at work. The Pareto principle, also known as the 80-20 rule, says that, roughly speaking, 80% of the effects come from 20% of the causes or, in business, that, for example, 80% of your profits come from 20% of your customers/clients/patients.

Interestingly, the rule demonstrates a fractal quality such that there’s an 80-20 distribution within the 80-20 distribution, and so on and so on. In other words, it’s a power law.

This explains why there’s a market, a very small but very profitable market, for million dollar cars, million dollar stadium sky boxes, private jets, $800 sneakers and even the $20,000 cosmetic procedure that a “competitor” down the block charges $5,000 for.

Most people tell you that what you provide is (or even worse, that you are) a commodity. If you want to believe them, okay. On the other hand, either they shouldn’t be your customers or you should have a range of services/products designed to scratch the itch of someone who wants only the best.

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