The Cost of Being Costly

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When we found out last week that John Edwards, the presidential candidate of the “two Americas” fame, gets $400 haircuts from a Beverly Hills salon, it struck me as one of those little stories that seems kind of profound.

For one, we now know for certain in which of his two Americas Edwards dwells. For another, it is one more example of excessive pricing, which seems particularly rampant lately.


A couple weeks ago in the Business Journal, for example, we published an article about a young entrepreneur who makes T-shirts, some of which retail for more than $200 because they have silver thread in them. He found that the high price helps him because boutiques don’t want to stock mere $30 T-shirts. But $200 T-shirts now that’s what people want.


Paying up to buy something truly exclusive makes perfect sense. A real Tiffany lamp costs a breathtaking amount of money because it is, in fact, rare.


But that’s not what I’m talking about. I’m talking about $200 T-shirts and $400 haircuts. Or $15,000 dresses and $900 coffeemakers. Things or services that are, in fact, pretty common. But because they’re sold on Rodeo Drive or even on Robertson or Melrose Place, people are willing to pay 10 or 20 times what they’d pay for an ordinary one.


In recent years, marketers have done a great job I’m being charitable in that characterization of adding a little something extra, or placing a shop in a fashionable spot, or importing an appliance made in Africa, and then quadrupling the price to make us think we’re getting something truly rare. Increasingly, it seems, we’re lining up to buy such stuff.


These days, they don’t even need to add something extra. Sometimes all they need to do is jack up the price and announce that they are now purveyors of exclusivity.


I had an acquaintance who went into the public relations field. He struggled for several years. Suddenly, though, his fortunes turned. He showed up at a lunch meeting with me in a fine tailored suit and smiling with easy confidence. When I got around to asking him about his new prosperity, he confided that all he did was stop scuffling and competing with the other PR people. Instead, he doubled his rate and sent the false message that he didn’t want or need new clients. He said he told all prospective clients that he would only accept them if they were willing to pay a premium price for premium service. After that, he said, life was easy.


I was never a client so I don’t really know, but somehow I doubt his talent or skill improved much from his earlier days. Mostly, it was his chutzpah and his fee schedule that changed. I let him pick up the check.


That was years ago. And now that I think about it, the timing of that lunch meeting is kind of interesting. It occurred at the crest of an economic cycle. It was an era when people were able and willing to pay much more to buy a tiny bit of perceived exclusivity. A couple years later, in the grip of a recession, people were less willing to do so.


I don’t know if excessive pricing is a dependable indicator that says we’re at the top of the economic cycle. But I do wonder how many $400 haircuts will be sold a couple years from now.



Charles Crumpley is editor of the Business Journal. He can be reached at

[email protected]

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