We live in a world where people are very cautious about how they spend their money, and they are swift to object that “your price is too high”. So you wonder if you are selling value or price.
This desire for rock-bottom prices is the reason there will always be a company that will try to sell their product or service at a lower rate than their competitors.
According to this article, pricing is more straightforward for physical hardware products where the cost of sales is known but very hard for intangible services and software where the price is usually “value-based”.
The article mentioned above notes that value-based pricing problems compound in markets where there are little standards, and there is an unfair or uneven basis for comparison with alternatives.
But as business owners, we have to ask ourselves: am I selling value or price?
It is something we need to consider.
Difference Between Price and Value
In simple terms, according to this article, price is what you are asked to pay. Value is what you are willing to pay.
So the money customers pay you is your financial reward for providing the item, while the value is what your customer believes the item is worth to them. Understanding this difference is important.
For example, a $1,000USD phone might seem expensive to me, but you might think of it as great value.As entrepreneurs, when making investments, we need to learn to concentrate on value. Click To Tweet
So as humans, we either buy an item or we invest our money if we believe the value is greater than what we are paying the company.
As an entrepreneur, to persuade your target customers to focus on total costs rather than on acquisition figure or amount, you must have an accurate understanding of what your customers value, and would value.
In order to gain market value over your less knowledgeable competitors, you need to draw on your knowledge of what your customers value, and would value.
Concentrate on Value
Long-term value is the underlying worth of a commodity. As entrepreneurs, when making investments, we need to learn to concentrate on value.
According to this article, the monetary figure you see on that tag on an item at the store is the quoted amount for that commodity, usually based on sentiments and not the actual worth of the commodity.
So as customers, don’t look at that figure. When deciding to buy, consider the value you derive from the brand. And as entrepreneurs, we need to help our customers to concentrate on value.
Concentrate on providing a quality brand to your customers and help them differentiate the superior quality of your brand from the competition.
Going back to the example of the phone above, if getting that phone in the next twelve months is your goal; have you taken out time to understand the underlying value of that phone? Beyond the cost, does it have any intrinsic value that would positively affect how you live daily? Can its value withstand the test of time, such that if you plan to resell it, you will do so at a good second-hand value?
These are the key questions you need to answer. The shift of focus from the money you pay to value would help you create a margin of safety between the amount you pay and the value you are paying for.
Rather than looking only at the monetary figure, we need to look at maximising the perceived value. Make sure that customers understand that it’s not just the brand they are buying.
But they must also consider the research and development and the ongoing support you will give. The certainty of on-time delivery, your company’s history and reputation. The resources that went into your offering. These factors are worth a lot! Therefore, you need to make sure you educate your customers on this.
Despite your best efforts, you will not convince some customers. So what are you going to do when your potential customer says “No”?The shift of focus from the money you pay to value would help you create a margin of safety between the amount you pay and the value you are paying for. Click To Tweet
You need to realise that they have a choice and if they reject your product or service, that is not a rejection of you as a person. So learn from this rejection and improve your product.
Neither will a single rejection mean that other potential customers would not see the value in your product or service.
According to this article, the understanding of the value in business markets and doing business based on value delivered gives suppliers the means to get a fair return for their efforts.
If you are only selling for a particular amount, you soon recognise that when there is market pressure on this amount, your brand needs to respond by demonstrating that you have something different to offer your customers — something that will provide superior value.
Once you can assess and truly understand the value you provide in the industry, then you’ll be on your way to making a healthy profit.
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