I, Pencil: My $425 Price Tag

If you have not read the original version of, “I,Pencil“, or the variations as told by many others here is a quick summary

The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society’s legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men and women will respond to the Invisible Hand.

You likely need no more commentary to see this is about free market economy and the power of invisible hand in setting prices, meeting demands etc.

The famous line from the essay is

Yet, not a single person on the face of this earth knows how to make me.

Be that as it may. It is true no one person can make the pencil on their own. But a subtle point to note is there exist a few who know how to set its price.  Despite what economists say, the pricing is not all left to the market to set. Economists don’t think segmentation, or product positioning. A marketer on the other hand starts with customer segmentation, product positioning and capitalizes on the pricing power that comes with it.

This is back to school season. You likely just bought two dozen pencils for less than $2. If you are willing to shop around you might find even cheaper prices. Price for such commodity pencils are indeed set by the market – by the supply and demand. Add to that retailers cutting prices further to sell pencils as loss leaders.

But those are just commodity pencils that are undifferentiated. More importantly these are pencils that are targeted at a specific segment. You would think  students. True. But think more in terms of needs – Group customers in terms of the common needs they are using a pencil for.

For the segment whose needs are just writing there are many alternatives. The pencil is competing against all those substitutes. And its price is determined by the value of writing to customers and the price of all other substitutes.

But when you take the pencil and position it for other needs, by targeting those segments with those needs and are willing to pay different prices for meeting those needs you have a different game in your hand. You are not any more competing for writing needs or competing against similar writing implements.

That is the story of $425 Pencil,

The Perfect Pencil in brown with sterling silver (925/1000) pencil extender with built-in sharpener and eraser is the perfect adjunct to the pencil. Writes, erases and sharpens

The pencil is not a product. It is simply a value delivery vehicle that you use to position for higher order needs for which customers have higher willingness to pay. Specifically pay $425 for Sterling Silver version or $260 for Platinum.

So what if you do not know how to make a pencil? You only need to know customer needs, specifically those needs that allow you to command a price premium and not be reduced to nameless commodity competing only on price.

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