Any item, be it a one of a kind piece of art or an old tire is worth what someone will pay for it. If someone pays a million for a half eaten sandwich with John Lennon's teeth marks in it, is it really worth that price? Well, yes and no, yes it was worth it to that buyer, and no, it's not worth that to me. There is also a thing called perceived value, that sellers know about and most buyers don't. It's why a Mercedes Benz costs more than a Volkswagen Beetle even though they are both reliable transportation and German engineering. And both get caught in the same rush hour traffic and move at the same 12 mph. People think the Benz is worth more because it costs more. 'Why would they charge so much if it isn't worth it?', well the short answer is because they can and people will pay it thinking it's a good value and must be better in some way that a less expensive car. It's why Toyota also makes Lexus in the same plants from the same parts and designed by the same engineers and then sells the Lexus at 5 times the cost of the Toyota. Is a Lexus better that a Toyota? Is a Benz better than a Volkswagen? Is a higher priced car better than a less expensive one? Is a Bugatti better than a VW even though they are both the same parts, plant and designers? Why is a Jaguar more expensive than a Ford, they are both from the same company and are built in the same way... Perceived value.
When I price a piece of art I make, I could sell it for 5,000.00 and make a good profit, or I can sell it for 500,000.00 and make more profit and the piece becomes prized and sought after by collectors. A lot of art pieces in the 500.00 to 10,000.00 range stopped selling during the recent economic downturn, but the pieces priced at over 50,000.00 kept right on selling with no slow down at all. Billionaires spend money when others stop.
You have to find a sweet spot in pricing that lets people know that by buying this item you are a cut above the rest, but still find buyers with disposable cash.
