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Well, morality aside, I think there are crucial lessons to be learned in that whole Spitzer saga. While most humans are asking how can Mrs Spitzer stand beside her husband after what happened, little has been written about how and why public will shell out $1000 an hour or $4,300 a pop on the services by an “escort” (to put it politely).

This is no different from asking why some lawyers get away from charging $900 an hour versus $250 for others? And I think there are fundamental lessons for those who are in the service industry where you have to “bill” for your date.

But before we reply that, let’s try to put our heads in the mind of Mr Spitzer. What value was he getting from paying $1,000 an hour (not counting the cost of her train ticket etc).

1. A person of Mr Spitzer’s stature wants his dealings with prostitutes to be “highly discreet”. He cannot be seen looking for them in the streets. They have to come to him.

2. Emperor’s club is marketed as “high class service”. Hence, Mr Spitzer would expect his escort to be better dressed and discreet looking compared to most of Kristen’s “peers”.

3. considering someone like Mr Spitzer cannot be caught in the act, he would expect emperor’s club to be super efficient in organizing the whole “package”.

In a nutshell, Mr Spitzer wants to have a good day with a hooker discreetly and for someone of his stature, there is a price for providing such a service!

The moral of the story is that when you are targeting the high end market, there are other intangible factors (other that product performance!) that the segment values and are willing to pay for.

In the credit card industry, most credit cards do not charge any annual fee. Yet, cards like the American Express Black Centurion Card (which has a $2,500 annual fee and a $5,000 activation fee!) exists. The American Express Platinum Card has a $450 annual fee. Their gold card has a $150 annual fee.

How is it that one of the most popular combination of credit cards of frequent travelers is the Amex

Black or Platinum Card with the Starwood Preferred Guest Credit Card even though these cards charge annual fees unlike most cards? The reply lies in the many little benefits that are simply not available in regular credit cards.

1. Concierge service - Amex used to be the only ones to offer that service on their charge cards. But these days, many visa and mastercards offer that too. However, Amex allows you to have your own personal concierge who can get to know you and supply more personalized service.

2. Ability to book hard to get restaurants - Having a Amex Platinum or Black card makes it easier to book hard to get restaurants.

3. Priority notices to popular events

4. Having the best reward program - in my opinion, Amex has the best reward program in membership rewards and I think they can get away with charging a fee for that.

5. Starwood has the best collection of 5 star hotels - let’s face it - a successful executive does not stay at the Hyatt or Hilton!

6. Prestige - we all judge a book by its cover. A man’s clothes maketh a man! Carrying an Amex Platinum or Black card is indeed a status symbol.

I can go on and on about examples in other industries but the moral of the story here is that there is always a lucrative market in the high end segment. More often that not, “product performance” is not really the differentiating factor. But other intangibles often allows one to charge higher prices as faraway as you meet the market’s needs. These needs have more to do with attributes like personalized service, making your clients feel crucial and other “high touch” service not available in average products.

So whether you are a web designer, a consultant, a mineral water manufacturer, branding and identifying the right attributes that the high end segment of your market craves can often bring great rewards whether you find the right “package” and “value proposition”. Hey, after all, Mr Spitzer paid $1,000 an hour and I bet it wasn’t pro-rated whether it was by in 10 minutes!

Orginal post by Mr Credit Card