The Burt Lancaster School of Pricing

One of my favourite movies is Local Hero. It is the story of a Texan oil firm that attempts to buy out a small Scottish town and turn it into an oil refinery. From the very beginning, writer and director Bill Forsyth had only one man in mind to play Felix Happer, the head of the oil company, who eventually falls in love with the town and saves it from destruction. 

He wanted Burt Lancaster.

This presented the film's producer, David Puttnam, with something of a problem. Lancaster loved the script, but wanted $2m to play the role. That was a third of the film's entire budget, and far more than the producers could afford.
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...

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