Price is an Evil Mistress
Setting our price is a conundrum, isn’t it? If we set our price too high, customers go elsewhere. If we set it too low, we leave money on the table. So it’s a tough line to walk, but we all have to walk it. Wait a minute though, is price all there is? What about value? Doesn’t that count for anything anymore? Yes, as a matter of fact, it does, but thanks to the internet and the ability of customers to compare prices quickly and easily, price has become an even greater part of any marketing strategy. For more on the yin and yang of price vs. value, please read below.
Sam Bowers, a business professor and lecturer, tells us, “Looking for a place where price is not a factor is going to be a long lonely search in dark jungles.” And General Electric’s Jack Welch adds, “If you can’t sell a top quality product at the world’s lowest price, you’re going to be out of the game.”
Warren Buffet’s take is, “Price is what you pay. Value is what you get.” And this from an unknown writer: “The bitter taste of low quality lingers long after the sweet taste of low price has faded.”
In this tug-of-war between price and value, value does have its place. After all, if price was the only consideration, everyone would be driving a Chevy and no one would drive a Mercedes. Think about a restaurant you may have tried where the prices were low but the food was mediocre and the service was lousy. Would you go back? Or think about online retailer Zappos. You can certainly find lower prices than theirs, but they make shopping so easy and customer-friendly, why would you?
A recent article in the Chicago Tribune discussed a strategy by Williams and Sonoma, the upscale retailer of kitchen products, to lure their customers away from online shopping and back into their stores. The plan is to offer more in-store product demonstrations and cooking classes, thereby making a Williams and Sonoma shopping experience richer, more entertaining, and more educational for their customers than an online experience would be.
So the trick, apparently, is how you communicate, promote, and execute your value proposition. If your value proposition is, “We’ve got the lowest prices in town,” better be careful. By definition, there can be only one low-price leader, and there will almost always be someone trying to undercut you and win that dubious crown. So unless you’ve got the size and volume to be a real low-price contender, you’d be wise to find a better value proposition.
Whatever your product or service, price is important, but it’s rarely the sole consideration. Remember, while people may argue that your price is too high, they vote with their feet . . . if they’re still talking to you, it means they see value in your offer that they don’t see in others. Obviously, they would like to get your value and the other guy’s price, but you’d be a fool to make that deal. Your value, your price.
Make no mistake, people will pay for what they want, and what they want is usually not your bare bones product or service. They usually want something more. It may be convenience, it may be selection, great customer service, a fun, customer-friendly experience, deep product or service knowledge, or a lot of other things. That’s for you to figure out. So get clear on the totality of what your customers want, structure your value proposition based on that, and set your prices accordingly.