The Price of a Pen

There are two pens in front of you. They look the same: a $5 pen made in China and a $10 pen made in the USA. Which one would you buy?

If you are like most consumers, you’ll purchase the Chinese-made pen.

So, how could I inspire you to buy an American-made pen for three times the price of its Chinese-made look-a-like?

One self-made billionaire, Tom Kartsotis, has figured this out, and the answer is elegantly simple: imbue your product with a powerful sense of place.

The Paradox of Place

'Storefront' by Foundry Co, Pixabay

‘Storefront’ by Foundry Co, Pixabay

Sense of place is a way of describing the emotional relationship that an individual has with a particular area. It is a value-laden concept that encapsulates a person’s feelings, perceptions, attitudes and behavior towards a specific location.

Ironically, the more global our economy, the less we leverage the marketing value found in the sense of place. In a digitally-driven world, the products and services we buy aren’t from anywhere. They are from the web.

Over the last three years, I’ve driven 25,000 miles across the United States trying to answer one simple question: what happens when you market the place you do business just as much, if not more, than the business you do?

What I found was astonishing: directly promoting the place one does business, even in a global economy, has profound effects on one’s business.

The Law of the Origin Story

We love a good origin story.

An origin story is the back-story of a person, place or thing. It is the legend behind a comic book character, a corporation, a product or even a sport.

When it comes to corporate origin stories, it would seem that a garage or a dorm room is one of the best places to build a successful business. Hewlett-Packard, Apple Computer, Google, Amazon, Disney, Yankee Candle, Harley Davidson, Mattel, Maglite, and Lotus all tell origin stories that start in someone’s garage and end with success. Facebook, Dell, and Microsoft are all purported to have started in dorm rooms. Read enough of these origin stories and you might think your business would be more successful if you move into a garage or find yourself a dorm room.

These kinds of stories are powerful. They are told and re-told. Great origin stories become legends. They become a piece of pop (or even corporate) folklore.

Unfortunately, the more global our economy has become, the less we believe our origin story – and the place we’ve built our business – matters.

The Power of Location-Envy

Location-envy is the emotional belief that one’s success is defined by the location of one’s work.

We’ve been taught that envy is bad (it is one of the seven deadly sins.) But location-envy is benign. The envy we’ve been encouraged to avoid is destructive. Location-envy is constructive. It’s a unifying force, an amazing source of pride, a tremendous motivator, and — most importantly —a powerful emotion.

Location-envy only occurs when one believes that their own community cannot deliver the success that they can achieve elsewhere. Or when one believes their success is defined by the place in which they do business.

Location-envy creates a connection between the place we’ve built our businesses and the success we’ve seen. It creates a connotation, a feeling about our town, that connects our desire for success with a specific place in the world. These kinds of emotional connections and connotations are sticky. Not only do they appeal to those in the industry, they’re easy to remember.

Location-envy is so powerful it can help you attract more dreamers and innovators. It’s so effective it can reduce your operational costs. It’s so sticky it can increase tourism. Location-envy is such an immutable force it can even increase your profit margins.

Attracting New, Qualified, Talent

'Downtown Warsaw, Indiana, in October 2005' by Derek Jensen, Wikimedia Commons

‘Downtown Warsaw, Indiana, in October 2005’ by Derek Jensen, Wikimedia Commons

In 2013, Nextremity Solutions moved their executive offices and the fifteen full-time employees on staff from Red Bank, New Jersey to a little town an hour west of Fort Wayne, Indiana on rural route 30 in northern Indiana called Warsaw.

Why?

According to CFO Frank Patton, the move was “not only because it has the right address for the orthopedic industry, but because it also has the orthopedic talent pool needed to grow the company.”1

The right address for the orthopedic industry? The talent pool needed to grow the company? What could Warsaw, Indiana possibly have to offer that Red Bank couldn’t? What resources and talent could convince a $10 million dollar start-up to pack up, rent new office space, buy new houses, and move their staff 720 miles to a town of 13,000 people?

Simple: three of the five largest orthopedic manufacturing companies in the world are based in Warsaw, Indiana. The Nextremity Solutions team believes that their chances of success in Warsaw are better than in Red Bank, or New York, or San Francisco, or anywhere else in the world.

Warsaw, Indiana is the Orthopedic Capital of the World(TM) and Orthoworx, a nonprofit founded in 2009, spends every workday ensuring that it stays that way. Aspiring medical device designers, engineers, even executives know that if you are going to make it in the orthopedic industry you have to be in Warsaw.

Reduce Operational Costs

Elkhart, Indiana is the RV capital of the world!

Elkhart generates $7.2 billion a year manufacturing 80% of the recreational vehicles (RVs) sold in the US and accounts for a quarter of all employment in the city. Sixty-one separate companies manufacture everything from recreational vehicles to mobile homes.

Everyone from Georgia Pacific to Magic Chef has decided to open distribution centers and warehouses in Elkhart to be closer to the sixty-one companies building mobile homes in town. The result: lower operational costs and an entire economy of just-in-time manufacturers.

Building an RV in Elkhart costs less than anywhere else in the country.

Increased Tourism

Hamilton, Missouri is the home of the Missouri Star Quilt Company. A few years ago, Jenny Doan and her son Al started uploading a new quick quilting tutorial to YouTube every week. Today, 240,000 subscribers watch Jenny’s video uploads each Thursday.

See how Jenny promotes Hamilton, Missouri?

Today, Jenny and her team of 124 employees, fulfill 3,000 orders a day. 50,000 tourists from around the world flock to town to meet Jenny and learn from the master. Making Hamilton Missouri is the Quick Quilting Capital of the World!

Better Margins

So, who is the billionaire venture capitalist who’s figured out how to inspire consumers to spend $15 on a pen just by marketing the place it is made?

In 2011, billionaire venture capitalist Tom Kartsotis (the founder of Fossil) set out to launch a new luxury watch brand. Rumor has it that before Mr. Kartsotis decided to set up shop in Detroit, he commissioned a study to find out if the Detroit brand alone added value to the products he planned to produce.

The study asked participants “if they preferred pens made in China, the USA, or Detroit at price points of $5, $10 and $15 respectively.” The result? Given a choice between a pen made in China or the USA, participants consistently chose the Chinese pen. As soon as they added the option to buy the $15, Detroit-made pen to the mix, subjects immediately decided they would gladly pay the higher price point. Why pay more for a Detroit-made pen? It has been imbued with a sense of place. Detroit’s reputation for manufacturing high-quality products adds intrinsic value to the pen 2.

So, Shinola set up shop in the former General Motors Argonaut research building, also home to an arts college. In 2013, the first 2500 Shinola watches hit the market, and they sold out in a week at $550 each. Eighteen months later, Shinola grossed $80 million, selling watches to clients as American as President Bill Clinton, a proud owner of twelve watches. In 2015, Shinola plans to sell 250,000 watches, and a whole host of other Detroit-made luxury-goods.

'Shinola Store Detroit', by Kanwar Sandhu, flickr

‘Shinola Store Detroit’, by Kanwar Sandhu, flickr

Shinola‘s product-line has already expanded from wristwatches to leather bags, bikes, iPhone cases, pocketknives, footballs even pet supplies. Like Fossil, before it, Shinola is a lifestyle brand. The Detroit team is also venturing into retail with plans to open 16 domestic and European stores by the end of 2015.

Shinola’s marketing, not to mention the entire ethos of the brand, is about Detroit. The city’s name is on every single one of their products. Shinola markets the place they do business just as much, if not more, than the business they do.

This is exactly the kind of corporate marketing that builds a sense of place. It is the kind of marketing that creates location-envy. It is the kind of powerful storytelling that opens the door to the reinvention of Detroit as the Luxury-Goods Capital of America.

These stories lead to a big what if.

What if you marketed the place you do business just as much, if not more, than the business you do?

What if you leveraged the power of location-envy?

Town Inc. by Andrew Davis

Town Inc. by Andrew Davis

Bonus

Take a listen to chapter 13 ‘Saving Detroit’ of Andrew Davis’ latest bestselling book Town Inc.

  1. Press Release, September 4, 2013, “Ortho Company Moving Headquarters to Warsaw,” Ink-Free News.
  2. Fossil founder digs the D, Daniel Duggan, Crain’s Detroit Business, May 27, 2012.