The first time I read that comment, I thought about how true it is. But it also reflects something that is missing in most of our marketing efforts.
The quote is from Sean D’Souza, a New Zealand marketer I’ve been keeping an eye on for some years.
He makes an important point. We, as sellers of products and services, worry all the time that if we charge too much, the buyer will turn away.
Let’s face it, prospects step back from a buying decision when they have doubts in their mind about the purchase, objections if you like. We haven’t convinced them that what they are going to get is going to make a real difference to them – and that’s what value is. It makes a positive difference. They are better off for making the decision in our favour than if they hadn’t.
But I think the point made is very real; our prospective customer is always making a possibly unconscious calculation in his/her mind – is it value? Business is about providing value to the customers. And that value can be determined only by the customer. The greater the perceived value you present, the greater will be the desire for your offering.
Price is what you pay. Value is what you get.
People seek value. Value is not a fixed number. It is a subjective relationship between the thing you are selling and what people perceive its worth to be. The greater the value relative to the price, the more likely people will respond to your offer.
Solving problems creates value too. And the more pressing the problem the more value a solution has. Also, the more severe the problem, the greater the value the solution has too.
The key is the perception of value. Free has no barrier. And hence no value. The goal of your marketing must be to create a greater perceived value of your product than the price you are asking. We must bring value to the transaction.
The simplest, and laziest way to do that, is to discount. It’s also the most damaging. Low prices create a perception in the client’s mind of low value. Discounting assumes that:
1. The difference in price between your 'regular' price and the discounted price is what is stopping your customer from buying; (ie your product doesn’t represent value)
2. It's worth it to acquire a customer whose most important consideration is how cheap your offer is.
There is a role for discounting, and that is to acquire a customer. You make your money from repeat customers, increasing the size and frequency of their purchases as they build increasing trust in you and your products/services.
There’s no point making the first sale, if you can’t make the second.
However, there is little benefit in so doing if all that is making them loyal is low margins. Yes, use discounting to acquire customers, but not to keep them.
I’ve written many times on issues arising from discounting.
Objections are those doubts that lodge themselves in the prospects minds about your offering. The greater the size and number of objections murmuring away, the less perceived value there is.
So, you have to remove them.
People want to avoid risk. People pursue gain, but the urge to avoid loss is more powerful because it works on a more basic level. In direct marketing for example, people usually can’t see you or the thing you’re promoting before they part with their money. So there is always a level of distrust and suspicion you must overcome.
People need to justify decisions logically. While people make emotional decisions, they justify those decisions with logic and facts. You should always give people the appropriate justification for making a purchase.
Value is related to information. Value comes from relevant information. Increase specificity -- By increasing the specificity of the message, you can better communicate value. In the absence of relevant information, price dominates.
In business, every single thing we do is about educating our customers in some way so they trust us, enough to buy from us. Facts educate our customers.
You must convince them that your product or service will meet their needs and therefore, fulfill their desires or assuage their frustrations or fears.
A prospect tells you that your price is too high for two reasons: you haven't built up enough value or you haven't shown them how your service can satisfy their need.
Use the drop-in-the-bucket technique ... "You have to show that the price you are asking for your product is a 'drop in the bucket' compared to the value it delivers," says copywriter Mike Pavlish
You must convince your prospects that your price is fair (or better yet, a bargain) – by making a comparison that demonstrates the value you’re offering in a compelling way.
Business is the activity of creating value. That is what you get paid to do. Customers do not want your products and services - they want what those products and services will do for them. Business people must learn to become value creators because those who understand value best will prosper and those who do not will fail.
When clients approach me for coaching, so often, they are not getting the clients they need, the right clients. Eight times out of ten this comes down to not knowing how to provide value their customers recognise, and covet.
So often they have not demonstrated a significant point of difference from their competitors, a point of difference that gives the prospect real confidence in selecting them.
For more than 29 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand where there profits really come from, where they’re leaving money on the table, and where their sales are costing them profits.
If you would like to discuss with me how you might do that, book a Strategy Consult here.
© Copyright 2017 Adam Gordon, The Profits Leak Detective
Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?