|George Zimmer, Men's Warehouse|
And you know what? I don't care. I know I'm paying a premium, but I'm a happy customer. I could probably go to a department store like Macy's or Nordstrom's and get a suit for a $150 less. And I probably wouldn't bother to try and find a matching shirt and tie. I'm very happy to pay extra for the service and simplicity of the Men's Warehouse. I always leave the store feeling like I made a great decision. As George Zimmer the CEO of Men's Warehouse always promises... "You're going to love the way you look. I guarantee it."
As CEO of a software-based start-up, it always bugs me when I hear people rave about software products, but aren't willing to pay the premium. An example: a few people I know have recently told me that they really love a web application (and iPhone app) named "Tripit." With Tripit, you can easily send pieces of your itinerary to the service, and the application will collect and create a useful travel guide. They have a version of the application called "Tripit Pro" which is available for $49 a year. The Pro service offers many useful features for people who travel often. Even though the service is very useful and the Pro service would be even more useful, these customers aren't willing to pay the premium.
At Punchbowl, we have our own premium service, and I always find that the best customers are the ones that choose to upgrade Punchbowl and pay the premium. These are the customers that value the service that we provide and are willing to pay a little bit to get even more. I appreciate customers who call me and say "I purchased an upgrade to Punchbowl, and I have a question." Contrast that to other customers who call me and have an expectation that they should get personalized tech support for free. These are the customers who never pay the premium, and never will.
Perhaps it's the responsibility of the start-up or company to make a product or create a service that causes customers to be eager to pay the premium. But I don't think so. The sad truth is that there will always be a subset of customers who desperately seek out the best deal and who aren't willing to pay anything for a premium service. Regardless of how much utility the product or service brings to their life, these consumers don't value their time as much as they value keeping another dollar in their wallet.
SWAMI SAYS: Steer away from customers who are always seeking the best deal and aren't willing to pay a premium. Spend more time finding and delighting customers that are willing to open their wallet and pay the premium. If you do this, your revenue and profits will grow faster, and your company will be more successful.... I guarantee it.