Learn the difference between price vs. value and how to use this knowledge to benefit your business.
“Value” is more than offering customers an affordable price point for your product — it’s also about offering an experience or atmosphere, and delivering a product that satisfies a customer’s emotions. But how do we define “value,” and why does it matter?
Why Value Matters
- “Value” is what your customers expect to receive in terms of products or services in exchange for what they must give up in terms of cost, and this differs from customer to customer.
- Value offers a way to differentiate your products and services from your competition.
- Different customers are looking for different value; the more types of value your business offers, the more customers it will receive.
- Customers who only care about the low prices are less likely to remain loyal to your business.
Why Low Price Strategies Are No-Win
- Unless you are the absolute market leader, decreasing prices will only lead to a pricing war with your competition and no one wins.
- Lowering prices means less profit.
- If you choose to lower prices, you’ll need to let new customers know about this change in your business. This will increase marketing costs and eat into your profit.
- Although you may see a short-term spike in sales from price reduction, it’s because you’re doing more work which increases operating costs, and thus, decreases profit.
How to Offer Value
- Use the Job Cost Form to determine the minimum price you can charge while still remaining profitable.
- This minimum price does not mean this is the exact price you should charge; if your market can bear it, round the price up and/or increase it for perceived value.
- Don’t forget about other factors customers consider when making a purchase, such as customer service, convenience, brand/business loyalty, and knowledge of the product.
- The better experience a customer has with you in relation to all these other variables, the better chance they will return for repeat business.