Rafi Mohammed

Who Can Reduce Lindsay Lohan's Jail Time? A Pricing Strategist...of course!

Posted on February 14th, 2011 (2 Comments)

By now most of us are aware of the trials, and well, trials of actress Lindsay Lohan. Ms. Lohan’s latest brush with the law involves being charged with felony grand larceny for allegedly stealing a $2,500 necklace from a Los Angeles boutique jewelry store.

Here’s an interesting fact, if the necklace had a fair market value of $950 or less, Linsday would have been charged with a misdemeanor. This would reduce her potential jail time from one year in state prison to six months in a local jail (which would be further shortened due to overcrowding).

The key term, of course, is “fair market value.” Just because the jewelry store asked $2,500 doesn’t mean that is the necklace’s fair market value. To aid Ms. Lohan and her lawyers, I am listing some possible pricing defense strategies to consider:

  1. Would the price have been lowered for a celebrity client? A key strategy to build a brand, as the designer Pratina Sethi is trying to do, is to have their jewelry worn by celebrities.
  1. What would other jewelers sell the piece for? Entertainment website TMZ surveyed three jewelers and their retail estimates ranged from $800 - $1000.
  1. “Fair market value” is a nebulous term – to be clear, it doesn’t mean the highest price paid – I’d interpret it as the price that most “target” customers would pay. How are the designer’s pieces really selling? Is Ms. Sethi having to take back pieces and/or are prices being slashed to make sales?  
  1. How long was the piece in the jewelry store? If for more than a few months, this is a sign that $2,500 does not reflect the fair market value. Did many customers express interest in the piece but ultimately decide not to purchase due to price?
  1. What price are other jewelry stores selling similar pieces for?
  1. What is the average markup of Ms. Sethi’s necklaces that have actually sold? Asking prices for necklaces sold on this site range from $795 to $1,800.
  1. Does the LA jewelry store have big sales? What is the usual discount and what is the probability that the necklace in question would have been included in the sale?

Given that the alleged theft is for a “one of a kind” jewelry piece, the fair market value is murky and indeed a key question to investigate.

Good luck to Ms. Lohan and Happy Valentine’s Day to all!

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Readers' Comments on This Blog Entry

From Deborah on February 14th, 2011
This is a really interesting analysis. It seems obvious that the marked price on an item is, in many cases, far higher than the object's actual fair market value. Bring on the expert witnesses!
From Scott on February 25th, 2011
Brilliant. What a creative way to show the power of pricing.