I heard the expression “value for money” for the first time nearly 30 years ago. Since then it has always been important for me to give value for money and to ensure I get value for money.
The expression means different things to different people. To understand people’s views on the subject I started a discussion on LinkedIn and I gathered the thoughts of many professionals. As I result I formulated the following definition:
“Value for money is the perceived benefit/advantage that a potential buyer has when deciding to purchase a product/service at a price which he/she considers is set at the right level.”
This definition is important because it puts the emphasis on what value means in a customer or prospect’s mind when considering a product or service he is thinking to buy.
It actually reminds me of a well known saying that “beauty is in the eyes of the beholder”. What this means in a commercial sense is that a business owner needs to align his “values” (plural) and those of his staff to the values of the prospect and vice versa.
Therefore the skill is to show a customer or a prospect that your product or service matches his values and therefore it is worth paying the extra money.
So let’s have a look at how this works in practice.
Value = perceived benefits/price
You can play with this value equation to see how it works in a customer’s mind in different scenarios.
– Example 1: If price increases, and perceived benefits stay the same, value goes down
– Example 2: If perceived benefits increase, and price stays the same, value goes up
– Example 3: If perceived benefits increase, and price goes down, value goes right up
In marketing and sales it is important to position your offer with the value increasing. You must either lower your price, increase your benefits, or increase your benefits MORE than you increase your price. Whatever you do, the value (as perceived in the customer’s mind) must increase, particularly when the customer is comparing your offer against a competitor.
The devil is in the details (plural) and so is the value
How do you then differentiate yourself from other business people in the same industry? You need to be sure that the prospect knows exactly what he is getting. What sort of details are we talking about? Here are few:
- Clear terms & conditions by the service provider.
- The ability to service over time (number of clients v number of staff, is telephone support available, is it free, what is the response time when there is an emergency).
- Experience and knowledge of the service provider(what is his authority on the specific field of expertise and his track record, what does the website reveal about his business, has he written any guest posts and articles, what is his overall reputation)
- Honesty of the service provider (when challenged, does he admit having limited knowledge of some subjects, which may be outside his field of expertise, or is he showing an overbearing attitude like “I am an expert on everything”.) Does he admit past mistakes and how does he deal with these? Is he helpful, is he willing to spend time to explain how to solve a problem?
- What are his qualifications and those of his staff?
- Does he have plenty of referrals and recommendations?
As I said before though, no amount of details will add value unless these match the prospect’s expectations. So time is needed to understand what the prospect is really wanting and the business owner would do well to acknowledge any limitations he or his business has in meeting those requirements.
A practical example
You install air conditioning units. The prospect gets 2 quotations, one from you and another from a different installer. You come up with a price which seems reasonable but the other one comes in with a slightly higher price, but which includes 3 years warranty, fully paid replacement parts and full service free of charge for 2 years.
Another example: You are a website designer. The prospect gets 2 quotations, one from you and another from a different designer. You provide a quote which seems reasonable but which is not flexible and you will charge for any change you will be making in the future. The other designer comes up with the same price but he will include a free study on keywords to improve the search engine searches and a free service for small future changes.
I do not have to tell you which one the prospect is likely to chose, but the question is, supposing you are now the second supplier, “have you made it absolutely clear what your service include?”
Many deals are lost because the service provider does not ask the right questions to understand what the prospect’s requirements really are. Don’t be one of them.
Today’s Micro Action
How do customers and prospective customer perceive your value for money? Take some time today and look at what you offer and try to look at it from someone else’s point of view. Does your website make your value clear, do you need to add more testimonials or explain exactly how you support customers after their purchase? Ask someone you trust to give you an honest opinion on your value, it could be that you’ve not made something clear enough and with some better explanation prospective customers will better appreciate the value that you provide.