Price vs. Value
In the summer of 1979, I was twelve years old. School was out for a couple of more months before seventh grade started and there was a gas shortage affecting the whole country. It was typical for long, long gas lines to stretch back a mile or more.
I was living between SoHo and Little Italy here in New York City. One of my best friends, Peter, saw these gas-starved cars as a market. We decided to fill a cooler full of dry ice and cans of soda and sell them to the motorists sitting in their cars with the engine off. (Even if you had air conditioning, you didn't want to use up too much gas.)
The idea was to push a dolly up and down Houston Street (pronounced HOW-ston), which is a big street here in downtown New York. We learned that there was a soda distributor about half a mile away and bought sodas by the case. I remember they were about 15 cents a piece from the distributor.
I suggested that we sell them at 25 cents each because that was the best price that I had seen in vending machines. I figured everybody would be happy to purchase a cold soda at this great price and we'd make money by selling a lot of units. We sold out several times, necessitating half-mile walks to the distributor and back in oppressive heat.
When we did the financials, we realized we didn't really make a whole lot of money. Selling hundreds of cans at a 10-cent profit really didn't amount to very much income compared to all the work it required.
It took many more years later, probably even after starting in the computer animation and visual effects business, that I realized that we should have been charging what the sodas were actually worth. There was a lot of value that we brought to people, and it wasn't necessarily the refreshing taste of a dry-ice-cooled soda; customers were smiling.
In hindsight, if we had charged 50 cents for each of those sodas — which would've been a higher price for a soda in 1979 — we would've made a lot of money at the time. Perhaps fewer people would have bought, but it would have entailed a lot less work.
We would have been rewarded more for our idea and market innovation.
I think reflecting the value of our service in the price we were charging would have instilled me with a lot more appreciation for business — a nice little haul for two enterprising 12-year-old boys.
That was my first business. Here we are, 25 years later, I'm still working in my own business. There's still a side of me that always wants to make our work as inexpensive and cost-effective as possible — but I also need to keep in mind that it's really about value and the win-win. There’s a saying I like: “Price is what you pay, and value is what you get.”