According to a marketing legendary story, in the early 1950s, the Chivas Regal brand of Scotch whiskey was having hard times to gain market share and its sales were low. In a bold move, the owners decided to double its’ price, without changing the whiskey recipe, and as an effect unit sales double.  In the 1980s, some U.S. universities adopted the same kind of policy, and the Chivas Regal effect became more associated with tuition costs than whiskey.  During that period, colleges started to raise tuition fees to bring in more money and saw a significant increase in enrollment, as parents equated higher tuition costs with a better standard of education.

Without doubt, consumers perceive price in different ways, using objective and subjective judgments to make buying decisions.  The Chivas Regal effect works on the premise that some of us use price as a cue to quality. All things being equal, a buyer may assume that a high price equals high quality even if there is no objective reason to believe this. A study by the "Journal of Consumer Research" demonstrated that consumers make some value judgments based on price. Researchers showed participants one advertisement for an expensive bottle of wine and one for a cheap one. When given a cue on quality, they gave the expensive wine a better rating. However, this study also showed that the Chivas Regal effect may not always work. When given a cue on value for money, participants rated the cheaper bottle higher.

For Sales professionals, winning deals at a premium price refers to successfully selling products or services at higher prices compared to competitors, while still maintaining a competitive advantage and generating substantial profits.  It involves offering products or services that provide unique value, appeal to a specific target market and justify the premium pricing.  Therefore, the question that arises is what specifically moves buyers to choose higher-priced products and what Sales skills are required so as to help them toward this direction?

Corporate Visions, a US Sales and marketing consulting firm, analysed feedback from hundreds of won and lost deals, as they tried to identify which Sales skills become more (or less) crucial in driving deal outcomes across higher, lower, and similarly-priced solutions.  They proceeded with analysing importance ratings across eighteen Sales competencies and what seems to standout in their data is the ability of aligning solution to needs, which involves showing how our product or service precisely addresses the challenges and goals of the buyer, ensuring that our proposed solution is a perfect fit for their needs.  This attribute is crucial across all pricing spectrum, suggesting that customers prioritise how well a product meets their specific needs, even at a premium cost.

Moreover, articulating meaningful value is another essential skill across every price point, but this is not only about stating features. As salespeople, we must explain how these features translate into real-world benefits for the buyer, especially in terms of return on investment (ROI), efficiency, effectiveness or any key performance indicator that matters most to them.

Some skills that matter to customers for lower-priced deals do not seem to carry as much weight when we are priced higher than the competition and vice versa.  For instance, creative negotiation appears to be less important at higher prices compared to lower prices.  This means that when selling at a premium price, our focus should be more on demonstrating inherent product/service value and less on the flexibility of our prices.  On the other hand, help justifying decisions appears to be less important in higher-price deals compared to lower-price situations.  In other words, buyers who are willing to consider a premium-priced product might already be inclined to believe in its superior quality and value. But when our price is lower, we may need to work harder to justify why our solution is the best choice among competitors. 

From the above it is evident that organisations should invest in equipping their Sales teams by tailoring their training and coaching to help them convey the value of their solution in every sales conversation. We should always remind ourselves that while cost is important, value perception matters more, therefore salespeople need to sharpen those skills that will win them more deals, even at a premium price.  Cheers!!!