What a Low Price Can Cost Your Brand – A Lesson in Arbitrary Pricing and Perception

By Andrew Hendricks

When times are tough, it can be tempting to lower the costs of your goods and services. While this can sometimes be the right call to lure back business, the success story of Grey Goose Vodka reminds us that how you price your product sometimes affects its perceived value regardless of quality. At least one person has become imminently wealthy from this simple rule, and his name was Sidney Frank.

Frank's first success came from the unlikely success of his importation of Jägermeister, a German “herbal elixir” in 1972. The brew was famous for their distinctive bottles and an unusual black-licorice aftertaste not familiar to American and non-German European pallets. Yet through either dumb luck, his unrivaled branding skills, or the marketing of Jägermeister as a “Frat Guy” beverage (or some combination thereof), Jägermeister was enough of a success (and an unlikely one to boot) to establish him among the wine and spirit elites.  

His greatest success, however, would not come until age 77 after developing the idea of released a “super-premium” vodka. Taking great pains to market themselves as “The Best-Tasting Vodka in the World,” Grey Goose focused heavily on their basis in France, with their use of French ingredients, and peppering unnecessary French words throughout their advertising copy. Because of the vast distribution network Sidney Frank had already established, Grey Goose was managing sales closer to decent than meager, however it wasn't the game-changing success Frank was after. The decision he and his business associates settled on subsequently is one which was so successful that many can't help but describe disparagingly. They simply doubled the price per bottle of Grey Goose. 

“They weren't always in such a great position,” wrote business blogger Jason Maxwell. “So what did they do? The brand managers realized that most of their consumers couldn't distinguish between good and bad vodka and rather just use price as their guide. The higher the price, the better it must be! So what did they do? They jacked up their price to $30 a bottle.”

Lest you think this is an unfair assessment by blogger Maxwell, just two years before Sidney Frank's death he gave an interview with Inc.com, an online magazine where he stated: “The big-selling high-priced vodka at the time was Absolut, which was $15 a bottle. I figured, let's make it very exclusive and sell it for $30 a bottle.”

Challenging the merits of such a decision (or at least, challenging a public that can't discern between value and marketing), lone columnist in New York Magazine writes: “Yes, some people may taste a difference,” says Wright of Liquid Intelligence. “But you’re talking about a grain-neutral spirit. The FDA definition is pretty narrow. At an elemental level, there is no difference. And anyway, you can’t possibly taste it when it’s in a Cosmopolitan. Grey Goose is about quality because Sidney Frank said it was about quality.” 

It was a well-known motivating ambition to all who knew Sidney Frank that he wanted badly to be a billionaire in his lifetime. In 2004, he was granted his wish when Bacardi purchased the Grey Goose brand for $2.3 billion. This was the most expensive acquisition of a single liquor brand in history and a price tag that is estimated to be 20 times Grey Goose's pre-tax cash flow at the time. Sidney Frank would die two years later having just been named No. 164 on Forbes “400 Richest Americans list.”

Andrew Hendricks

Editor-in-Chief and founder of HumanCreativeContent.com, a website that serves as a hub for freelancers to get new material workshopped and published, as well as an on-demand content platform for websites and new businesses.