People often confuse value with price. What is the difference between the two and why is it of any consequence to you? Shouldn't they both go together? That is not always the case and I will show you why.
People often confuse value with price. When you are developing product pricing strategies for your business, these two factors will come into play and you will need to appreciate how they interact with one another. What is the difference between them and why is it of any consequence to you? Shouldn't they both go together? That's not always how it works and I will show you why.
The Eye of the Beholder
What is the number one question people often ask when they are looking to purchase a product, or invest in some business opportunity? "How much does it cost?" And, that's only after they have turned the object over and over seeking the price tag.
In today's economy, the concept of value and price has gotten trapped together. They are not interchangeable. You may wonder why some people are still paying for expensive items when most of us are counting our pennies and trying to keep every available coin in our pockets. The answer to this question might just lead us to the truth about value and price, which can give us the upper hand in our businesses.
What is "Price"?
Price is simply a dollar amount assigned to an object or service. It usually reflects the going rate locally or globally. As a small business owner, you hope to stay competitive without turning off your target customer base. Now here is the balancing act aspect of it all. It is also a matter of profit. You are undercutting your own business and you will lose money if you come in too low.
What is "Value"?
Value refers to the significance that we apply to a good or service. It is tied into the perception of your business brand. Honda has formed a reputation as a solidly made car. People will invest more in one because it will keep their families safe and they can drive it for a long time. The choice, to buy, moves beyond mere price to what is perceived as the additional benefit that comes with investing in this type of car.
Translating Value
As you work to present your services and/or products to the consumer, consider how you will translate the value of your brand as well as the price. Over and over again, entrepreneurs who reach their customers on a more personal level with their marketing strategies are delivering value together with their price. If a customer feels that they can not do without your product, for whatever reason, they will continue and buy to buy regardless of an economic downturn.
So, how do you do that? How do you communicate value in every "transaction" you have with your customers, or your business associates? Examine your products and ask yourself a couple questions.
1) What can your product provide for your customers that others cannot (Objective Benefit).
2) Besides the physical product, what are you also delivering to your clients that they can't see? (Subjective Benefit).
Here is an example of what I mean. If your product is organic, it probably costs more, but what are the benefits of that? There are no chemicals used which pollute the land and threaten to humans. Families can confidently feed their children without stressing over artificial ingredients. You are promoting healthier children along with a healthier environment as a bonus.
The Verdict.
Is price or value more important? They are not the same, but communicating the value of your products to customers can keep them purchasing though your price is higher than the competition. This is how they interact.
The "price" of the product is a very tangible thing. It is a very objective component of your marketing strategy. It speaks clearly to the consumer. On the other hand, translating value to your clients is an art and is very much subjective.
The communication of value, and how you build it up in the marketplace for your service or product will allow you much more freedom on "price" than your competitors.
Loyalty is a powerful thing. There will always be someone who can compete with you on price. If you can build loyalty up, through communicating a greater value, you can charge nearly whatever you want and your customers will reward you with their business.
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