There once was a man who dreamt of being a baker. After many years of patiently saving and planning, he quit his job and resolved to open a new bakery – the best the world had ever seen.
He spent hours in his kitchen, creating the perfect pie. When it was done, he was dismayed to realize that no one knew what he was capable of doing, and that all his work was for naught.
To remedy this issue, the Baker decided to become famous. With much effort, he was able to attract the attention of the local news media, who agreed to conduct a comprehensive interview about his perfect pie. After the story became public, people came from miles around to get a glimpse of the Baker’s work.
“How much for one of your pies?” they asked.
“What a silly question,” he replied. “My pies are works of art – perfect in every respect. I do not wish to tarnish them with commerce, nor ruin them by sharing with those who can’t appreciate their subtleties.” Disappointed, the crowds left. What good was a “perfect” pie that could not be tasted?
The months wore on, and the Baker’s savings and spirits dwindled. There was little joy in being well-known as a miserly artisan, and the next rent payment was looming. With some trepidation, the Baker decided to start selling his pies. He drew “$1″ on a small chalk board, set it on top of his counter, and waited.
Word began to spread that the Baker was selling his pies. Curious townsfolk visited his shop, and when they entered, the Baker began to talk with them. He told them what ingredients he used, his special preparation methods, and the secrets of the art of baking. Visitors to his shop were gladdened by his change of demeanor and impressed by his knowledge and skill. Pies began to sell, word spread, and customers happily lined his pocketbook in exchange for a piece of heavenly pie. The Baker realized he enjoyed sharing his gift with others, and resolved to figure out how to serve even more customers.
A bit of experimentation taught the Baker that providing small samples of his pies to curious customers almost undoubtedly resulted in a quick and enthusiastic sale. Before long, he had so many customers each day that he couldn’t keep up – there were too many people to serve, and he couldn’t attend to their needs. People began to grumble, “I came here for pie, not a two-hour wait.”
There was more work to be done.
The Baker found some trustworthy associates among the townsfolk, and set about teaching them how to bake his pies. Before long, his busy kitchen was well equipped and staffed, and he was able to deliver as many pies as his customers wanted.
All was not well, however. Hiring employees and purchasing kitchen equipment required money, and the Baker was alarmed to realize he was spending far more than his revenue would support. If something wasn’t done, his workers would leave and his bakery would close.
One evening, the Baker finally put down his kitchen utensils and found a notepad. He calculated how much the bakery was spending, how much money was coming in, and how much revenue he would need to keep the bakery open and running.
After considering several different options, the Baker walked over to his chalk board, erased the “$1″ that had been displayed for so long, and replaced it with “$5″. Then, with significant anxiety, he went home to sleep.
The next day, customers once again filed into the shop to buy a piece of pie. Few noticed the new “$5″ sign, and those that did remarked as they paid: “This pie is worth every penny.”
At long last, the Baker found success.
What do you think this story means? Leave your interpretation in the comments…
(Photo credit: Tombre at sxc.hu)
{ 54 comments… read them below or add one }
Wow Josh. What a cryptic post.
I am trying to figure out the moral of this one. Surely it is not “raise you prices and then your poor planning and marketing, limited business know-how, and lack of systems to handle workload/workflow will disappear”
Surely that is not the message, right?
MY THOUGHTS ON POSSIBLE INTERPRETATIONS:
This story reminds me slightly of E-myth Revisited, but only in that the subject of both stories owned a struggling bakery (both struggling from overwhelming demand + lack of systems). Other than that the two stories seem very different. In E-myth the baker comes to terms with the folly of her poor planning and through very precise planning and hard work goes on to create a highly systematic, inspiring, and effective business. In this story the baker just wings it without any knowledge, makes a stupid decision (that the pies are not for sale), sets an uneducated and arbitrary price, has his business systems totally overwhelmed by demand, and then at the last moment he pulls out a calculator, raises his prices and lives happily ever after. Walt Disney.
On the other hand the beginning of this story does mirror how many small business owns start out. They are technicians, not businesspeople. They have a desire to create something beautiful, perfect. To them it is not about the money, in fact they cannot see putting a price tag on what they do, it is like their baby. They create, they give birth.
They also have little practical business skills so they pick arbitrary prices and don’t plan ahead. If they are truly gifted at what they do, and most are, they will soon be overwhelmed with more work than they alone can handle. They will need larger facilities and they will need employees (a.k.a. overhead). These employees are too be pitied because the owner will not instruct them well, they will not have clear roles and a clear purpose for their work, and without a doubt there will be conflict between them and the perfectionist owner because nothing they do will ever be at the level of the technician. At this point too many balls are being juggled and inevitably some will be dropped. Consistency will suffer. Staff will be frustrated. Customers will be disappointed, or worse.
Also due to the lacking business knowledge and poor planning, things like cashflow management will have been left unattended. It doesn’t take much for this oversight to turn fatal. Cashflow forecasting really is key.
Many people can create excellent hamburgers, few can create excellent businesses that sell hamburgers. The latter takes diligent planning of a “business artisan.”
OR
Maybe this is a story of a well executed publicity campaign. By creating such a perfect pie and promoting it as such and then denying willing customers the desire to taste his “perfect work of art” he raise the value of the product astronomically in the eyes of his potential customers; a “one of a kind” product.
Thus when he finally capitulated and let the public in he could charge any price he wanted.
Ok Josh, what’s the moral?
Would it have something to do with the raising of the rate for the crash course? Prices may be raised, but the value is worth it for people to pay the price, and they are starting to see the potential in the product and the teachings.
This story teaches many lessons. First off, it’s a tremendous example of one of the most important truths of business – business is a skill set, just like cooking, and to go in business and succeed you need these business skills (or others around you that have them). There is a great difference between a skillful person and a business person. So many people have a skill and a passion, but no business semse. Book writers know writing books, bakers know cooking, and business-people understand business. If you go into business, it behooves you to learn those skills as well. .. which I guess is a good reason for coming here to PMBA.
Secondly, notice that it’s all about HIM as a baker. He never seems to realize that it’s about the customer. A man who won’t even let people buy his work of art doesn’t give a crap about the desires of others, which leads to not having business sense. Business is basically trading person to person, trying to create win-win situations. It’s not one-sided, if it’s to last and do well (except monopolies of course).
Third, he does nothing, even at the end, to research what a good price should be. At the end he’s satisfied, when in actuality the pie might be a $20 pie compared to the ones other bakers are selling. Why be please with selling $5 pies when his competitors sell inferior products for $14.95? It’s ok to care for both the customer and yourself at the same time, and a higher price will often make people see more value in your product anyway.
In the end, this reminds me of the book of Proverbs. In it, you have the simple person (doesn’t get it) , the fool (rejects wisdom) and the wise man (fears God, talks with other wise people, and grows). This baker person is the simple person – he doesn’t know what he doesn’t know, and shows little inclination to learn.
I concur with Lauren.
If what you can offer is truly of value then you cannot simply give it away.
Customers that can percieve real value will automatically reset the dollar value in their heads to jusify the increase of the expenditure.
This reminds me of the first part of reading the book “Think and Grow Rich” (which is not in the pMBA list but I think it could be) … It features this poem “I bargained my life for a penny”. Here’s a link to it.
Basically, whatever you ask you shall get.
http://www.great-inspirational-quotes.com/my-wage.html
My guess is that it has to do with experimentation, something which, if memory serves me, Josh has mentioned before. The baker starts out with a great idea but as he goes on realizes that his idea needs to tweaked.
This sounds like your story, Josh. And the story of the PMBA. I’m not sure if you originally intended to avoide charging for PMBA content, but it’s definately worth something, as you’ve obviously found out! Cheers
Building a successful business means acknowledging that it’s a process with many adjustments and learning along the way, even for the best baker in the world! Building a business is engaging oneself and our partners in a process rather than a project with a beginning that eventually ends.
The story is about Value.
When value could not be assigned or communicated no one wanted the pies.
When value could be assigned and communicated (and understood!) people wanted the products.
When the price of the pies were raised, most folks still understood the value of them and did not flinch.
Its not about raising prices per se…it’s about communicating value and ensuring that the public understand and agrees. After all, perception is reality when it comes to value.
* Product
* Price
* Place (distribution)
* Promotion
it is always all about the right marketing mix!!!
This little story shows us the value of knowledge, and a bit about its application.
A great post. The moral according to me is.
Love your profession
Learn with your flaws instead of getting tense and come out with solutions
Make people aware of how much it worth which you are doing.
To me it appears to be a classical story of a craftsman, finding out there is so much more to do in order to make your product of your craft a commercial success, and a success for the business which produces this product. Being the best with your product is not it, even if all your heart and passion is going in to its production. Making yourself famous turns out not to be a solution, and so on.
It is too much of an example of a previous post to leave it unmentioned, the one where making pictures is compared to doing business successfully: Mixing the ingredients in a right way. This story shows one of many roads to it. Probably illustrative to many starting businesses, not always with the same happy end. The beginning and ongoing balancing act of a successful business is not found by everybody in pursuit of it.
But I could be completely wrong, and entertain you all with a view which is a product of my imagination!!! (which to me is also a vital ingredient for being a entrepreneur…)
I think the story speaks to the importance of ‘Value’ and the satisfaction gained by its recognition, both intrinsic and extrinsic. Recognizing the value of something is not limited to a thing (pies in the case of this story) but extends to its impact on a human and personal level. We gain personal and professional satisfaction by discovering meaning through our work, making a difference, and being of service.
It is a great tale about art and commerce, marketing and entrepreneurship, but above all about good pricing.
Interesting to me because I am currently going through the process: I think I have a great business idea, and I am wondering how to earn a living with it, and how much I should charge for each piece of service I am thinking of …….
Is it a good idea to set very low prices to get your first customers and then ajust, and adjust until you come to the right price ?
Or should you just build a beautiful proof of concept to showcase and set high prices from the start ?
I don’t know what it means, but I’m suddenly very hungry for pie.
Provide a quality product with great service and you will get loyal customers who will pay for the quality and service even when it is raised.
haha, I’m with Matt, sounds like it could well be about Josh and his PMBA/course.
I’m still a bit clueless about the moral myself though … maybe that if you get your price right from the beginning you can avoid many headaches?
I think the story is about “value” and “pricing”. In this case the price had little impact on the value of the pie. In other cases, the price has a lot of impact on the value. For example, when buying a pencil, you won’t pay $5 when you could buy an alternative such as a pen for $1. So the challenge for us is “are you building value into your products/services so that your customers are less price sensitive?”
One moral of this story -
Want a great business education? Start a business. If this poor guy had gone to business school there would be a lot of hungry people, and he would still be working to pay his student loans because he was undercapitalized.
But there are several lessons here. Among them:
1 – There is more value from the happiness you generate within as opposed the that which you seek from the approval of others
2 – Success comes from being of service to others (The Think and Grow Rich theme song)
3 – At a micro level there are several generic business lessons referring to the value of planning and good business practices
The story isn’t finished, however. Whether it was one of his former workers who quit waiting for a raise or a customer who never came back after the first two-hour wait, a small store opened up next door to his location. They sold a pie that wasn’t quite as perfect, was faster to make and package, and improved their front end to move them faster, reducing their overhead. They sold them for $2.95 and took much of his business, except for a few people in Birkenstocks that had no reason to switch.
Which gave the baker another lesson to learn, (adapting to change was a big theme here) and another chapter to be written…
To me it meant that success is a process. You cannot expect to get your results on the first try and though you may have a measure of success at each stage, it is worth reinventing and replanning and reassessing to get what will eventually give you the feeling that you have achieved it.
You don’t need a perfect plan to start. Get doing, get a great product, test a few prototypes, then learn as needs arise.
Jefferson is correct..the story is about value. Consumers will pay what they feel a product is worth, it’s perceived value. Pricing below that perceived value is called “leaving money on the table”. Pricing above that point results in reduced sales. The trick is finding the point at which you maximize return on investment.
Its about the increase of prices for your mba crash course isnt it? you want to let people know that every penny spend in the crash course is worth.
And its a good example on how the market works, demand/offer.
Think of where he would be with just a little upfront planning and not waiting for the perfect product or strategy and fine tuning his strategy. Along the lines of “Ready, Fire, Aim” that I on my current reading from PMBA…
Who are you? I am a baker.
So you love what you do? Yes.
It’s not what I do, it’s who I am.
What is your best product? Cherry Pie.
Do you sell it? No, I display it, it is an art.
Cool, how will you pay for it?
Will people pay to look at it?
Of course, it is art.
So, all art is worth looking at and paying for it.
I don’t know about all art, but mine is.
If people do not pay, what will you do to keep making your pies?
Would you consider letting them taste it? Maybe.
What would you charge for this taste?
I don’t know, I am a baker, not a banker.
Are you flexible?
What do you mean?
Pick a number and see if people will pay it.
What if they don’t?
Pick another number.
If they start buying a lot of it, raise the number until they stop, and then take it back.
Are you willing to learn arithmetic?
What do you mean?
If people like your pies at a price you like, you will need people etc. and your price will rise. Are they still buying your pies?
You are making this too complicated.
Really, maybe you should pick another game.
To run a successful business:
One should not only have a good product or service, but the product or service (value) should be reputable(Brand), useful (Utility) to the customer, aptly priced (Price)and available to the customer(demand).
The comments on the story are far more interesting than the story ! They show that people will interpret what they want to – which means it’s often not what Josh writes – it’s how we read ( and understand it !)
Seems to me the lesson is in the title… he didn’t give up, he continued to learn what he needed and eventually his business prospered because of it.
Hi
This is probably about your experience starting this website, Josh. I am guessing you have decided it is time you need to raise the price of your “pies”. Let us know what the new price is. I am enrolled in a Law degree at present but I am considering your course down the line.
Thanks for sharing your wisdom.
Get the VALUE right. If not, you’ll eventually be out of business!
Watch your focus. You accomplish what you’re trying to accomplish.
Winning starts with beginning. You need to try and use whats available on disposable as long as you believe in yourself. People grows and mature, thats the same with business. The road is not always straight, expect some jungles to succeed. Coaches are available when you need them. “The Best Way to Predict The Future is to Create It “
First of all I would say the moral is what is a good product without you being able to sell it.
Second, what is the use of a good product with a selling price lower than its cost price. It will only bring losses.
Third, what is the use of a good product without proper planning and control. It wil amount to losses only.
Last, a good product will sell for a price better than the comeptition if it has more value attached to it.
@Jocelyne
(I know this is not a forum, and who knows if she will see the reply but I thought this was an interesting question)
These are just my thoughts (and rehashing of some good advice I have read elsewhere) but…
Start with high prices.
Pick a price that you feel is reasonable. Then, since we love what we do and often start out selling to our friends or close contacts, double or triple that price. And now you have the price you should start out with.
Now work hard to give them value beyond what you are asking.
It is much easier to go down on price that up. So set your prices high.
Then if you do work for someone who is price sensitive and you need to give them a deal you can give them a discount.
Never reduce your price. Give them an estimate/invoice with your really high price clearly displayed and then under that have the discount and the price you are charging them.
This does a number of good things for you.
1) It let’s them know that you are highly skilled and your work is highly valuable.
2) If you do this with you early clients, as an “early-adopters” discount (for example), you let them know right from the beginning that you are going to be charging them more in the future.
) You can use the discounts as bartering leverage (very useful). For instance, you could give them a discount for agreeing to be in a video about your product or service. Also, you could give a discount if they pay their invoice early (that helps with cashflow), a discount for referring a friend, a discount in return for goods or services from them (ex: if they are a printer you could exchange the discount for their printing services)
) It will hopefully dissuade any trouble-clients, the ones who don’t want to pay you what you are worth but want you do everything for them, the kind that will drain the life out of you.
) Your clients will come back for repeat business or refer their friends to you not based on price but on the quality of your service and work. This is very important. You want to work with people who value and understand what you do. They will keep you passionate. And they will pay for that value. By only working with people like this you will enjoy your work more, you will do better work, and you will satisfy your customers better. The customers will love you and your work and they will refer their friends, these friend will also be excellent clients. (This is the method of the book “Book Yourself Solid”)
Anyway, that is just my opinion. Maybe someone will let me know I am wrong.
Let’s see.
btw, what response one little ambiguous post has received!
Just like the title says, PERSISTENCE. Each time the baker had a “setback”, he revised his plan, took action to remedy the situation, analyzed his results, and kept repeating these steps until he found something that worked.
I think the interpretation is that on every level the baker has “problems”, but nothing that is insurmountable. By sticking with the consistent action. one can overcome whatever they need to to be successful. Also, the saving and careful planning is only the very first step on a long journey to success. Great post.
The story may imply that once you start progressing in life, its not sufficient to relax, New challenges come along, and one needs to adapt to face these challenges. Persistence worked for the baker, but he had to take tough decisions, like raising the prices, to remain successful.
I purposely chose not to read the other posts so they would not influence my interpretation of the Baker story. I see the Baker’s mis-steps as a failure to find out what his target market wanted in a pie and make a long term plan on how to meet those desires. What will happen when the customer’s tastes change, will the Baker be able to change his specific focus on the perfect pie and create the perfect tart (or whatever the customer wants in a baked good)?
I would think there a few lessons to be learned from this story the first of which would be preceived value. the others would be the power of marketing and the third is to make sure you do a proper study of your business and make a proper business plan before you start the business.
1) Stop being in love with your product, be in love with your customer…and your bank account !
2) If you can’t, become a teacher
You might be a great baker but not necessarily a great businessperson! Why suffer the anxiety of uncertainty. Pay for the advice of a consultant to get you on the right track!!!
The theme I liked the most was the Baker’s discovery that sharing his gift with others brought fulfillment and that business skills were ulimately the vehicle to do this sustainably. His persistence was evident as he faced each challenge by listening, changing and responding. As he did so the value to himself and his customers grew (the economic ideal). The customers got their value (eating pie, short wait, learning method, bakery to continue) and the baker got his (making pie, sharing pie, sustainable growing business).
Another perhaps more subtle theme was that his success was haphazard and risky, and that he heavily relied on his persistence with his approach. “If the ax is dull and its edge unsharpened, more strength is needed” (proverb). Acquiring business skills or assistance earlier might have prevented some of his mistakes or answered questions sooner about the profitability of his venture.
This story is about many things and the mail essence is in the title too.
Josh appears to have chosen a ‘Baker’ as the Baker has to mix many ingredients to create the pie – so do all who want to lead any profession or business.
Being persistent ,reacting fast and improvising your strategy every day is the only way to be in business and keep moving ahead
Thanks
Chris
I believe this story best captures the business need of accurately assessing the value of products or services TO THE CUSTOMER. We may think what we are making is too valuable (even too precious to sell), then again we may sell ourselves short and/or fail to count our costs. The persistent baker benefits from being a parable and managing to do all of these things while still having a happy ending. The real world isn’t so forgiving–just ask Willie Amos whose baking “fame” cost him his name!
CORRECTION: Wally Amos, not Willie (see http://www.biography.com/articles/Wally-Amos-9542382 for more)
Find your passion, let go and have people experience it.
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abraham Lincoln
Life will pay any price you ask!
Just make sure you’re asking for the right price….it wasn’t until the end that he asked for a price that would justify his time & effort, adequately compensate him for his talents and cover his costs to produce the product. The only way to make sure you’re charging the right price is a proper business plan upfront and adequate financial controls that are reviewed regularly!
You can’t put on a price on doing what you love.
Calibration? The iterative approach? Ideas are plentiful, execution is the hard part? Please tell us what it’s supposed to mean :p
It means that if you have a good enough product people will pay what it is worth and you can be successful with it.
Create a quality product, use good marketing, and you can sell a product at any price.
Know your value – if you think the work you have done is worth $1, then it probably is. If you think it is worth $5, then it probably is.
Now how much you are worth and don’t be affraid to ask for it!