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Staff post about: Alan Sugar Become an Author

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Sugar began Amstrad with the money he saved from selling antennas and electronic equipment out of the back of a second-hand van he purchased for about $75. From the time he began selling items at the age of 11, Sugar would figure out a way to sell more of the products at a higher price, which he deemed price points.

The formula was pretty simple. Sugar would set the initialprice of his products very low and a lot cheaper than his competitors. This would start a buzz in the industry and throughout the market. He would then release the product at that price, but offered an upgraded version, or premium version, at the same time. He found out during his early years, that more than 80% of the people buying his products would opt for the premium version or upgraded version.

Sugar would receive the boost in his initialproducts without having to raise the prices on the items. This would later make him state, “At Amstrad, we want your money.”

This formula gave the consumers two clear prices from the start and Sugar could raise the price on the products without having to actually raise the prices laterwhen the products became popular. Of course, this idea has been stolen by almost every other industry, including the electronics industry, but Sugar's price points formula always seemed to work. By 1980, Amstrad was on the London Stock Exchange and at its peak, would be worth more than $2 billion.

Even though Sugar started Amstradby producing cheaper electronic equipment, he found out that more of a profit can be made selling high-market items. This realization made Sugar come up with the idea of price points. Make the same item with an upgrade at a higher price and you not only sell more of them, but you make a bigger profit or a higher-ticket product.

Through all o f his successes and failures, Sugar still points to the fact that price points were the best idea he ever had. Sell cheaper than your competitors, then offer an upgrade to the same product, at the same time, making it a premium item he could sell as a high-ticket item.

He found out that selling a higher priced item was just as easy as selling a cheaper item, but you made a lot more profit. If you are selling a $100 item and making 20% percent profit, you can upgrade that product, making it a high-ticket item, selling for $1,000 and make a 30% or 40% profit.

Both the price points and realization that selling high-ticket items made more money, where two pieces of advice that he would dish out to other aspiring entrepreneurs when asked to speak at colleges, universities or business organizations. However, Sugar would always tell them, “Find your own innovative ideas and what works for you.” He would also comment how hard it was to do this by saying, “One problem with young people, they think business is cool. It's not cool, it's tough.”

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