$300 Flip Flops & The Philosophy of Money

Okay, I’m going a bit philosophical on y’all this month.

That wasn’t the original plan. I’d been planning to share some important insights into AdWords. But that’ll have to wait cuz I got something more important to discuss instead.

And it’s something that applies to all businesses… not just those who use AdWords.

Actually, this gets down to the absolute fundamentals of what you’re trying to accomplish in marketing.  (We’ll get to that in a bit, but need to set it up first.)

So what’s so important?

MONEY

Yep. Good ‘ol cash. Moolah. Greenbacks. Benjamins. Smackers. Coin. Dinero.

This article was sparked by a Mastermind Group I’m in. Recently, we had a few speakers come in to talk about money, the psychology of money and building wealth.

One of the speakers posed the following question (that he says is important for ALL of us to answer):

“What is your philosophy of money?”

The question kinda surprised me because, quite frankly, until he asked that question I never thought I had a philosophy of money!

But we all do. Most of us just haven’t stopped to think about it.

How bout you? When was the last time you stopped to think about your philosophy of money?

What is it that you believe about money?

Money Is Not The Root of All Evil

For example, there’s a common saying “Money is the root of all evil”.

Do you agree with that statement?

I don’t.

I believe money is just money. It can’t do anything on its own.

If you take a twenty outta your wallet, put it on the table and tell it “go do something evil”, nothing’s gonna happen.

Because in and of itself, money is neither good nor evil. It just is.

It’s what people DO with it that makes money good or evil.

So, following that logic, you could make the case that it’s actually people that are the source of all evil. Though, along with that, you’d also have to say that people are the source of all good.

Whoa… going a bit deeper here than expected. My brain’s starting to hurt.

So before we jump off the philosophical deep end, let’s reel things back in a bit and get to the main point I want to make here and how this all applies to your business…

See, in thinking about my philosophy of money, one of my beliefs is that, in general, people aren’t too good at determining the value of money on our own.

Is $5 Really Worth $5?

Yes a $5 bill is worth $5 and a $100 bill is worth $100. That’s not what I’m talking about here, though.

To understand what I’m talking about, we need to get clear on the difference between COST and VALUE. And to do that, I’m gonna turn to the Oracle of Omaha, Warren Buffett, who once described it this way:

“Cost is what you pay, value is what you get.”

So, what we’re talking about here is how do you determine what the VALUE of that $5 or $100 is to you?

Or, more importantly for business owners, what’s the VALUE of $5 or $100 to your prospects?

As business owners, that’s a critical question to answer. Because the only way you’re gonna get their dough is if they believe the value of what they’re getting from you is equal to or greater than what they’re giving you.

And here’s the key to this… most of the value does not lie in the features of the product/service you provide. It’s in the ultimate benefit that your prospects believe they will GET from your product/service.

$300 Flip Flops

Here’s an example of what I mean:

Let’s talk flip flops for a minute.

You can get flip flops on Zappos.com or at Target for less than $20. If you want a pair of leather flip flops at one of those places, you can find them for $50 or so.

Want a pair of Prada flip flops at Saks? That’ll set you back about $290. (Want the leather flip flops with a rubber sole from Gucci? That’ll be $350 please.)

Now, we’re talkin’ flip flops here. There’s not much material that goes into making them. Basically about 10 inches of rubber and some thin straps.

Is the cost of materials and labor that go into the Gucci and Prada flip flops $300 more than the ones you’ll find at Target?

Not likely.

But people will shell out $300 for the luxury brand…

Because in their minds the higher cost, in and of itself, makes them value the flip flops more.

Because in their minds, the Prada flip flops are a status symbol.

Because in their minds, buying Prada flip flops buys them membership into an exclusive club they want to be a part of.

In other words, the value of the Prada flip flops isn’t in the flip flops themselves, it’s in how the flip flops make them FEEL. It’s what wearing Prada flip flops represents to them. It’s how wearing those flip flops helps them play out the story about themselves they picture in their minds.

This example is about luxury brands, but the concept applies to pretty much anything you sell. You have to understand the true motivations behind WHY your prospects want what you offer. You have to understand what they value and how they value it. You have to understand the story they believe about themselves and help them write the ending they wish to achieve/avoid.

The Most Important Job of Your Marketing

The key to what I said before about people not being too good about determining the value of money are the words “on our own”.

See, most of the value we place on things is shaped by EXTERNAL factors. We’re not good at doing it in a vacuum.

It’s shaped by our friends and the people we surround ourselves with. It’s shaped by media and the culture we live in. It’s shaped by the brands and marketing messages we’re exposed to (by the way, we direct marketers can be a bit dismissive of branding, but a powerful brand does wonders for establishing the value of its offerings).

It’s that last one that you have control over. YOU have the power to help your clients determine the true value of what you’re offering them.

Arguably the most important job of your marketing is to build that value up so your prospects believe they’d be foolish to pass on your offer. AND bonus points if you convince them it’s worth paying you a premium over what your competitors charge.

That’s not easy to do.

It takes a lot of research. It takes a lot of testing. It takes a lot of work.

But doing it will be the most valuable thing you can do for your business.

Well, at least that’s my philosophy.