POT #1 | A Collectors Percieved Value.
A card that could only be obtained by winning the Coro Coro Comic illustration contest in Japan in 1997–1998. With only around 40 cards known to ever exist. This Card changed hands this month for a jaw dropping $ 16.4 million. The most expensive trading card ever sold. My logical side likes to believe “the best product at the best price” was the winning recipe for a good product. But reality has proved that an Objects material worth (Production Cost) is irrelevant. What matters is how much people perceive it to be worth, or rather, how much a person is willing to pay.
Logan Paul sold his Pokemon Illustrator card for over $ 16 Million US via auction, to the son of Skybridge Capital founder, Anthony Scaramucci. Upon hearing the news, my first thoughts were “if someone wants something, then there is no price ceiling”. It got me thinking of perceived value, and how different it can be between consumers.
Is it possible to recreate this type of value by design ? We have a product that has a manufacturing cost of a couple of cents that has just sold for $ 16 Million. At the very foundation, it sold for this price because us humans have decided that its worth that.
Designing a product that can do this sounds impossible. It most likely is impossible. But I had to dig into how and why this could happen, because there are lessons that can be applied in FMCG or Durable Goods. I want to take a look at the principles that could help you sell a good products at a great Margin, using this card as inspiration.
How do Collectors Perceive Value ?
Collectors cannot be treated the same as your general consumer. There a number of primary drivers that influence the purchasing decisions of collectors. Perceiving Value in collectibles is a complicated topic and is very subjective. There can be a huge emotional influence. The pull factors can also be very different between collectors. For some, the purchase may be nothing more than Wealth Signalling. Why else would you encrust it in a flashy diamond necklace? For others, it can be as simple as getting back that special card they had as child that they lost at school.
Some factors though, can be used or translated into almost any other product.
Having something that no one else can get is what trading cards are built on. The scarcity in trading cards starts off by design. Scarcity is the core mechanic beyond what makes trading cards so fun to collect. Pokemon as an example will not print to full demand. Supply is intentionally constrained at release of a new set to maintain the chase dynamics in collecting.
The Cards Condition is often standardised through a grading agency. This grading then further plays into the cards scarcity. Cards can be assigned a value, such as a GEM MINT, which essentially means its the perfect example of what it should be. Its usually true that achieving this grade is very difficult, even for cards freshly pulled from packs and handled with care. Often, damage or factors that influence grade already occur during production.
Many collectors have an emotional connection to the products they are collecting. This is built through story telling, often tapping into a childhood connection like Pokemon created through their Cartoons, Games and Cards. Being a Pokemon collector also builds you status in a niche community.
For many new collectors the Resale Value is the primary value baseline. This has been created by media, with the various high profile trades that have occured online. Like the Pikachu Illustrator card we are basing this POT on. The stronger the resale value the more intrinsic value a collector will place on a specific card. Outside of these high profile sales there is also a huge community of creators who trade thousands and thousands of dollars in Pokemon cards.
GOAL: Move Retail Price As Far As Possible From Manufacturing Cost.
I see this all the time. Products or brands cant get their products to separate from their production cost. Pricing is based on industry standards like production cost X 2.5 = Retail Price. The reality of these situations is because of continued competition, in 20 years that will be production cost X 1.5. This continues until there are one or two big players in the market. Who were the winners? I believe they are the ones who build a brand and a story. That’s what we can take away from this Pikachu card.
Not all products are collectibles, but we can apply things that work for collectibles into almost any other physical product. I would argue that it is a non negotiable. This can help companies move away from the above attachments.
Build customer relationships that last.
Building Relationships That Last By Following Pikachu.
We can take some key components of the mechanics used in Trading Cards and apply them to almost any other product. Recreating these mechanics will not only justify higher margin, but will build a lasting relationship with the customer which naturally creates more price elasticity.
Scarcity is something that is created artificially in Trading Cards. It drives demand by creating a strong desire to buy the product. Wanting something you cannot get is hard. Pokemon has done this so well, that when product is released, consumers are led into riot like behavior in a battle to empty the shelves.
You can recreate similar dynamics in FMCG or in Durable Goods by creating exclusivity by design. Nestle’s Nespresso did this very well at launch. You could only purchase their pods through their exclusive retail experience. That gave them complete control over the full product experience. Buying pods almost felt like you won a competition, but you were paying for the prize.
Emotional Connection is something that can be built with customers with time. Its a factor that carries a large weight in price elasticity. The best emotional connection ever created by a brand must be Apple. Customers were loyal, and would continue to make repeat purchases even in the face of better and cheaper alternatives. In my own personal case, I do not even know what the price of a phone is. My interest is how much is an Iphone ? Why? Because that is exactly what I am buying, regardless of if there are actually cheaper and better options on the table. In my case, Apple has disconnected the manufacturing cost from the Iphone.
Grading a Card in Collectibles is a way of assigning a numeric number to the condition and quality of the card. Collectors will pay 10 times more, for something that is only slightly better quality, on the exact same product. This proves, that humans appreciate quality and will always naturally gravitate towards it. We should always apply this principle in product design. Its important though, to not get confused as to what quality actually is in reality.
“Quality = The degree to which a product consistently delivers its intended functional performance, reliability, and user experience, while aligning with customer expectations and price positioning.”
Moving a product further than anything based on the above definition of quality is a wasted cost that eats margin with no purpose. Most often, consumers are not the ones footing the bill for over designs. Its the company who made the product who has to deal with that cost. The opposite is also true. Often, we are willing to sacrifice good quality, on a whim to chase a specific price point. Our product slowly loses features, reliability or performance. This is sometimes referred to as “shrinkflation” in FMCG.
The success of a good product that makes money, is often hidden in something completely separate from the actual product itself. Its hidden in the Consumers perception of what it is. As a brand or a company, we are always full in control of what that perception is or is not.
Cheers
V
