Pricing that is appropriate for a target market

In the first episode of the Celebrity Apprentice 2010, the contestants were divided into two teams based on their gender.  The women's team chose the name Tenacity, while the men's team chose the name Rock Solid.  Both were given the task of running a burger joint in Manhattan.  All the proceeds from the 3 hours when each team would be running each restaurant would go to the charity of the leader of the winning team.  The men's team chose to price their burgers at a base price of $100, with higher prices for burgers with extras (like shaved truffles).  The women's team chose a base price of $20 for their burgers, with an option to donate $250 to charity.  The women's restaurant had a long line of customers waiting to come in and be served by female celebrities like Sharon Osborne and Cindy Lopper.  There was no line outside the men's restaurant as some patrons were seen leaving the restaurant after seeing the prices on the menu.  Instead, the men relied on personal invitations to high net worth individuals who were willing to contribute to charity.

At the boardroom, Donald Trump had a surprise for both teams.  Joan Rivers had visited both restaurants and had chosen one of the two teams as her favorite.  The team whose restaurant received Joan's vote would get an additional $10,000 to add to the amount of money they earned.  When Donald Trump announced that the women's team had impressed Joan, the men's team appeared deflated.  However, this disappointment was brief as the men had been able to get significantly higher revenues from their efforts than the women.


This is the marketing lesson:  When the base of customers is large, offering one's products or services at a low price can be an effective strategy.  A small profit from a large number of customers can result in high revenues.  However, when the base of customers is small (as in the case of a restaurant with a small seating capacity), higher prices combined with high quality can lead to far higher revenues.  The men's team was more effective because they identified and recruited individuals from the right target market.  Equally important, by asking for higher contributions (set by the high price for menu items), they were able to gain higher revenues to contribute to their charity of choice.