The small canteen was normally empty at this time of day.
I sat at the table and started eating my lunch. It wasn’t long before the door opened and in walked one of the owners of building where I rented an office.
He got a drink and sat down in front of me.
We’d not spoken much before and I was struggling to think of what to say to break the ice when he took off his watch and put it on the table in front of me.
“How much is that watch worth?” he asked.
He smiled as I picked it up, turned it around, tried to see what make it was – even held it up to the light in some attempt at kidding myself that I actually knew anything about watches – which I didn’t.
So I innocently asked, “how much did you pay for it?”. He smiled, put the watch back on his wrist and said something that I remembered ever since:
What I paid for it is immaterial – its value is what you’d be prepared to pay for it.
The Difference Between Price and Value
The point of the lesson is that price and value are two completely different things. You can’t judge value by only looking at price.
For instance, from time to time when I have a meeting a few hours away I’ll use a toll road. Taking the toll road means:
- I don’t get delayed as the road is always quieter
- the journey is considerably less stressful, so I arrive in a better frame of mind
- often I arrive so much earlier that I have time to return calls and emails, time that I would have spent in traffic
So the value to me from using the toll road is much greater than the £5 price of the ticket.
The easy mistake to make in your micro business is to compete on price, rather than value.
Competing on price is a bad idea, because it’s a race to the bottom. There will always be someone else with deeper pockets who can afford to drop the price lower or for longer than you can. In a competition based purely on price no one really wins, because if you have to drop your price below your break even point to win business, it’s not worth having the business in the first place, you’re going to make a loss – and in doing so you’re undervaluing your products and services.
Instead you need to market your value. Here are four steps to help.
1. Target the right customers . . .
We’ve already established that value is evaluated in the eyes of the buyer, therefore targeting the right buyers is very important.
Let me give you an example.
One of my personal goals for this year was to really improve my fitness, so I started running. I bought the cheapest pair of running shoes that I could find, £20 in the sale – my thinking was if I didn’t get on very well then I hadn’t wasted much money. However, I’m really enjoying it, and I’ve grown to appreciate that if you run regularly a good pair of running shoes are an important investment, they help with the running and can help you avoid some of the common running injuries. So, now I’m considering getting a much better pair, that will cost between £60-£100.
I started out as a bad target customer for a running shop, I just wanted the cheapest shoes possible to get me going, I was buying purely on price. But now, I appreciate the value involved, and I’m a good target customer for a specialist running shop.
You need to target your products and services at the right type of customers, those who will appreciate the value you offer.
If you find yourself having to “sell” it’s likely a sign that you’re talking to someone who doesn’t fully appreciate the value that you offer.
2. Never compromise your message . . .
A crucial step in never undervaluing your products and services is to never compromise your message.
Let me ask you a question. When was the last time you saw an advert from Apple on the TV, in a Newspaper or online that offered a massive discount?
Apple has a very consistent marketing strategy, they occasionally offer small discounts on special days like Black Friday, but in general the price of an Apple device is the same price, regardless where or when you buy it, online or offline.
Your marketing strategy needs to be the same. Decide what the price of your product or service is, based on the value that you provide, and then stick to it.
Discount is like toothpaste – once it’s out of the tube you won’t get it back in again!
Don’t start discounting as soon as someone tries to squeeze you on price – as a general rule, the first time a prospective customer asks if you’ll give a discount, take the opportunity to restate the value of what you offer, if they ask again, start really considering if they are your target customer because selling a product or service to someone who doesn’t appreciate the value will often cause problems, and can lead to refunds.
When you do explain your value, always remember our next point:
3. Lead with your benefits . . .
Here is one of the golden rules of sales and marketing, regardless of product, service or industry:
Sell benefits not features
Off the top of my head I couldn’t tell you the screen resolution of the latest iPad, but I know from the adverts that films and photos look amazing on it. That’s because Apple don’t lead their marketing with features, they lead on benefits.
Features make your products and services comparable with other businesses. Imagine for a moment a web hosting company, if the company markets on the basis that their packages have XGb of disk space and XGb of monthly usage you can compare their list of features with any other similar host and decide on price. However, if their marketing is focused on the fact that they specialise in WordPress, or that they personally care for your website, night and day, so you don’t have to think about it and can get on with running your business – that’s a benefit, and that’s much harder to compare against, and takes them out of the price comparison business.
Are you clear on the benefit of your products and services? If not take a piece of paper and make three columns down the page. On the left is features (for the iPhone we might say large memory capacity) and then in the middle column write “which means” and then in the last column translate this feature into a benefit – so for the iPhone it could be to “take your entire music collection with you, anywhere, in your pocket”. Do you see the difference, the benefit helps the target buyer appreciate the value. If you don’t get a good benefit, keep asking “which means” until you do.
4. Create an experience . . .
The final point in ensuring you focus on your value, is offering your customers an entire experience.
One of the beauties about being a micro business is that you can provide a higher level of service to your customers. The likelihood is that you have less customers than larger businesses in the same industry or market – use this to your advantage. Get to know your customers, build strong relationships, positively encourage feedback and look for ways that you can wow your customers.
What little elements of value can you add to your products and services that don’t cost you a lot, but really set you apart from others. A free newsletter, only for customers with additional tips on getting the most out of your products and services, a private group on Facebook or Google+ where customers can meet and help each other.
With an experience, a little often goes a long way. I remember a few years ago talking to someone who had bought a new car, when he went to collect it with his wife the sales person had put a really nice bunch of flowers on the back seat because he heard that the new owners wife was coming to collect the car with her husband. It wasn’t an expensive gesture, but it really made her day.
In many cases the experience will be remembered far after the price has been forgotten.
Today’s Micro Action
Spend some time considering the difference in price and value. Are you targeting customers who will appreciate your value? Are you offering a consistent message, focused on benefits and not features? Could you offer more of an experience to enhance the value of what you provide? Look through the points above and note down areas where you could do more to promote the value of what you provide, then plan actions so you make it happen.